Lloyds dividend hopes face FSA scrutiny talks

 
Michael Bow
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TAXPAYER-owned Lloyds Banking Group will go head to head with banking regulators next month to thrash out a deal on reinstating its dividend for the first time in five years.

The bank, which is 43 per cent owned by the taxpayer, is currently negotiating with the Financial Services Authority about plans to give cash back to shareholders, which could happen as early as 2014.

The group, led by chief executive Antonio Horta-Osorio, will push regulators to back a shareholder payout once minimum banking capital requirements are agreed by European regulators late next month.

Lloyds scrapped dividends when it was part-nationalised in 2008 but profits forecast for 2013 and a high Core Tier 1 capital ratio have opened the door for its reinstatement.

Both sides are now awaiting a firm decision from Europe – in the form of the fourth Capital Requirements Directive due to be considered at the end of November – on how much capital banks will need to hold, before negotiating a deal on a potential payout. Lloyds will face pressure from the City watchdog and the Bank of England to put the overall prudential safety of the business ahead of bringing back the dividend.

The FSA declined to comment. A Lloyds spokesperson said: “We have always said we would like to recommence dividend payments, when the financial position of the group and market conditions permit, and after regulatory capital requirements are defined and prudently met. We work productively with all regulators in that respect.”