Lloyds stalls on dividend

LLOYDS Banking Group will not resume dividend payments to shareholders this year, despite freeing itself of &pound;480m a year in interest payments by redeeming &pound;4bn in government-held preference shares.<br /><br />The bank confirmed yesterday that it had sold 87 per cent of a &pound;4bn share placing to existing shareholders at 38.43p, with a 13 per cent &ldquo;rump&rdquo; sold into the market at 60p per share. Profits from shares sold on the market were returned to investors who did not take up their allocation.<br /><br />The success of the placing allows the bank to pay back &pound;2.3bn to the Treasury, which itself took up &pound;1.7bn of the share offer, maintaining its stake in Lloyds at around 43 per cent.<br /><br />Lloyds was restricted from paying dividends as a condition of the government&rsquo;s &pound;17bn bailout, but as the first European bank to begin repaying state aid, it is now free in theory to resume payments to investors.<br /><br />But a spokesman for the bank said it would not resume dividends this year, despite freeing itself of interest payments on 12 per cent on the government&rsquo;s preference shares.<br /><br />The bank, led by chief executive Eric Daniels, has already paid around &pound;250m in interest this year, but will not now have to pay the remainder of its &pound;480m-a-year bill to the Treasury.<br /><br />The spokesman said the average shareholder would have an allocation of 340 shares, which would have made them just over &pound;77 at today&rsquo;s closing price of 66.1p. Those who did not take up their allocation would receive a cheque for &pound;75.<br /><br />The placing raised Lloyds&rsquo; core Tier 1 equity ratio by 80 basis points to 6.7 per cent, giving the bank more freedom to increase the amount it lends into the UK economy. <br /><br /><strong>LLOYDS SHARE PLACING<br /><br />KEY ADVISERS</strong><br /><br />Lloyds used a trio of investment banks as joint sponsors, financial advisers, bookrunners and placing agents on its &pound;4bn share placing.<br /><br />JP Morgan Cazenove was joined by Citigroup and UBS on the cash call, with JPMorgan&rsquo;s team led by chief executive and former Barclays finance director Naguib Kheraj, alongside star dealmaker Piers Davison.<br /><br />The UBS contingent was headed up by Tim Waddell, UK co-head of investment banking, and Christopher Fox of the Swiss bank&rsquo;s corporate finance team.<br />