Disposal may speed dividends

 
Marc Sidwell
Follow Marc
BOTTOM LINE

THANKS to the size of this year’s dividends at St James’s Place, Lloyds Banking Group is moving one step closer to paying out a dividend itself once again.

Lloyds has not paid a dividend since the government acquired a 43 per cent stake back in 2008, but after a strong showing in 2012, talk began to mount last year that it was time to flash shareholders some cash again. But we’re still waiting.

The problem is pressure from regulators for increased capital holdings. As a result, some have suggested 2015 as the earliest the next Lloyds dividend might be seen.

With Basel III implementation underway since 1 January and the Eurozone crisis still unresolved, significant capital buffers make sense. But Lloyds has come a long way, with its core tier one capital ratio up from 6.4 per cent in 2008 to 12 per cent today: estimated to rise to 12.2 per cent when the St James’s stake sale goes through.

With the banking group’s recent results showing its underlying profit up to £2.6bn in 2012 from £638m in 2011, and with it now comfortably above the Basel III minimum of six per cent core tier one capital, there ought to be room to pay something out without seeming irresponsible.

That is, if the regulators can be convinced. Which is where St James’s Place comes in. After raising its dividend by a third in February – and promising a similar rise later for dividends later in the year, the investment manager looks sure to bring Lloyds a good price.

In itself, £600m isn’t a huge boost to a £39.6bn core tier one buffer, and there may be more effort needed before any payout, but this takes chief executive Antonio Horta-Osorio just a little closer to making Lloyds’ shareholders a lot happier.

ADVISERS LLOYDS STAKE SALE IN ST JAMES’S PLACE

RUPERT HUME-KENDALL
BANK OF AMERICA MERRILL LYNCH

SHORTLISTED for City A.M.’s dealmaker of the year at our 2012 awards, Bank of America Merrill Lynch’s Rupert Hume-Kendall led the team that is helping Lloyds Banking Group sell off a minimum of 20 per cent of its stake in wealth manager St James’s Place via an accelerated bookbuild.

Hume-Kendall, one of BoAML’s most prolific dealmakers, was promoted to become the bank’s chairman of Global Corporate & Investment Banking for Europe, Middle East and Africa (EMEA) last October, after a busy 2012 that saw him advise the flotation of Ruspetro, a sale of shares in Reckitt Benckiser and help 3i on its strategy in the face of dissent from activist shareholders.

He has worked at BoAML for more than 15 years, prior to which he worked at UBS in the equity capital markets team.

Hume-Kendall was joined on the deal by Oliver Holbourn and Peter Brown, both members of BoAML’s corporate team.

Holbourn joined BoAML in 2000 as a graduate trainee, and in recent years has worked on the IPO of Glencore where the bank was a joint bookrunner; the $7.2bn Intesa San Paolo rights issue; the National Grid rights issue and the $5bn Danske Bank rights issue.