Lloyds set to drag its feet on returning cash to investors

LLOYDS yesterday insisted that its focus remains fixed on cementing its strong capital position and that any plans to hand back cash to investors are still just a speck on the horizon.

The bank said that reports it was mulling an imminent buyback of shares held by the government were pure speculation, particularly coming in advance of the finalisation of the new Basel III capital requirements agreed last weekend.

City banking analysts had suggested Lloyds may end up over-capitalised if the regulations are finalised in their current form, with UBS maintaining that the bank has up to £9bn of surplus capital on its books.

However, sources close to the bank dismissed the idea that it is about to launch a buyback, adding that it would likely be over a year before such proposals are considered.

Eric Daniels, Lloyds’ chief executive, has already stated his intention to return to a dividend-paying policy, though the European Commission has forbidden the bank to distribute any cash to investors until at least 2012, in the wake of its bailout during the financial crisis. It is not clear whether a buyback would violate that agreement.