Member Info for BigEgo

Will it hold...

The main question now is what counterparties have exposure to the risk of default. One obvious candidate in HSBC, but also Hang Seng Bank and Bank of East Asia.

More downgrades Wednesday. Pay attention to Evergrande.

https://www.jaunenglish.com/fitch-downgrades-china-evergrande-sees-probable-default/

I’m always keeping an eye on foreign stories with banking relevance - just learning about Evergrande in China this morning…

Plenty on social media, but doesn’t seem to have much western financial press yet. Here’s some info from zerohedge (yes I know - but there are other sources!)

Depends whether China can contain it or banks take a hit.

https://www.zerohedge.com/markets/doomsday-evergrande-arrives-creditors-demand-immediate-payment-bonds-no-longer-eligible

This mornings 3% drop is clearly a combination of the circa 1.4% dividend being removed (0.67/47.19 prior close) plus an element of sellers that were just holding on until qualifying for the next dividend. The co-incidental (?) Goldman Sachs downgrade to SELL is just one analysts view - and he was saying sell when LLOY was at 27p!

But perhaps more interesting - and maybe market paying attention - is the next BOE monetary policy decision today at 12:00.

From an article on Bloomberg today - they say most economists expect the BOE to lower the level of interest rates needed before QE starts to unwind. This opens the possibility of negative rates - something that Banks have been told to have contingency plans for as we all know.

Interest margin is crucial for retail banks, and if the negative rate scenario plays out - I expect it to be a negative for LLOY, at least in the short term.

All eyes on 12:00 then!

I've pulled out the last years data (not an ideal period due to Covid chaos last March obv) but anyway looked at behaviour around ex dividend day. I know its a small dataset but I get a feeling that what is typical is an initial drop for approx the dividend amount (normal) so 37p off and then often around 1% more of a fall until around midday when price often bases.

So depending on where it closes today, given current price as i write 11am (3840) that would be a drop to 3800 initially then further weakness and divi bailers until about 12:00 around 3760.

So looking to buy around that time around that price tomorrow (subject to todays close).

Its not great but its a plan/idea. :)

https://www.forexlive.com/news/!/european-bank-regulators-reportedly-leaning-towards-extending-dividend-ban-20201210

China insurance co increasing stake in HSBC. Lifts banks.

http://googlenewspost.com/2020/09/28/european-markets-rally-as-banks-bounce-hsbc-up-10/?feed_id=475

“ Flexible Average Inflation Targeting (FAIT) “

What a missed opportunity!

I would have gone with:

Flexible Average Rate Targeting (FART)

“Plan” is misleading.
There is no plan, which would imply intent.

“ Her remarks come days after BOE Governor Andrew Bailey played down the prospect of such a policy any time soon. He said it is in the toolbox but that ‘doesn’t imply anything about the probability of us using it.’ ”

Part of the BoEs role is to guide money markets and sometimes the threat of something is all that’s needed to get the outcome you want.

www.bloomberg.com/amp/news/articles/2020-09-27/boe-s-tenreyro-sees-encouraging-evidence-on-negative-rates

Good to read these comments from the NatWest Chairman - you have to feel comfortable he knows what he is talking about...

Clearly the return of dividends is both the biggest current hope for investors and threat to shorters.

Personally (logically too?!) I think it’s inevitable (even if there is another small delay - which I doubt) that dividends will start to be paid in 2021.

What will that trigger? Cash rolling back into LLOY shares from pension funds etc that have to maintain an income stream.

It will be a significant income too for those that get in early.

LLOY was capable of paying 3.25p per share until COVID.
At Fridays close of 24.72p that’s an income of over 13%!

You won’t get that income in 2021 but in the years ahead it seems highly likely.

My SIPP is hanging on to this income for the next 10 years...

Interesting day - FTSE +0.2%, BARC + 0.4% but LLOY + 2.3% !

May be linked to tip today (Behind a paywall but jist of it below):

“...Anyone who takes a punt on Lloyds should not expect a quick payday but its shares look good value at this level...BUY”

https://www.thetimes.co.uk/article/dont-bank-on-it-but-this-looks-cheap-6kshq73p9

As if by magic:

“UBS President Axel Weber wants to crown his career in the financial industry with a big deal.”

UBS believed to be running the numbers against four top European banking targets: Deutsche Bank, Commerzbank, Barclays and Lloyds.

https://translate.googleusercontent.com/translate_c?depth=1&hl=en&nv=1&pto=aue&rurl=translate.google.com&sl=auto&sp=nmt4&tl=en&u=https://www.tagesanzeiger.ch/die-hochfliegenden-ideen-des-ubs-praesidenten-axel-weber-844945783239%3Futm_source%3Dtwitter%26utm_campaign%3DEd_Social_Post%26utm_medium%3DEd_Post_SZ&usg=ALkJrhhRdcjHPQQiNMljsPm2ERilSYqwsQ

No I don’t. However it is true that the MW position has generated a lot of commentary, and therefore once it goes away it can only be positive for sentiment.

Of course it’s small. Thank god!

A tiny reduction from 0.61% float short to 0.59% - but keeping an eye on this useful link for any further reductions to lift sentiment...

https://shorttracker.co.uk/company/GB0008706128/

Something else I found from 2006 mentioning the dividend yield being a huge factor in takeover targeting.

With the last 3 years total divs each totalling 3p+ we are now up to about 12% yield vs 25p on an eventual return to normal.

Whilst banks can’t issue dividends or buyback shares in themselves - there is nothing stopping them buying shares in other banks and effectively delivering that forward yield to their own shareholders...

Donald Tosh at stockbrokers Speirs & Jeffrey, said: "I think that Lloyd's independence is impossible to sustain at the current share price because of the yield. The group is paying for its own takeover."

2006: https://www.google.co.uk/amp/s/amp.theguardian.com/business/2006/feb/02/lloydstsbgroup

An oldie but a goodie.
Wells Fargo takeover rumour from 2005 - citing a good fit.

YES 15 YEARS AGO NO NEED TO POINT IT OUT! :)

I was just wondering how much cheaper Lloyd’s must look today to potential predators like Wells Fargo and what price could it be stealed at? For example: if just 30p was offered you would reasonably expect claims of “Too Low!” - but that would represent a 20% premium which is typical.

Wishful thinking on a Sunday morning of course - but anyone else wonder how such an event could play out?

http://news.bbc.co.uk/1/hi/business/4184578.stm

OneStep - sorry mate you are blocked/filtered.
Dont post links from BS sites that just use a random number generator to show the share price for the next 2 years.
FFS - are you that stupid?

Remaining 2020 dividends for ISF

Announced: 10/09
Excludes Div: 17/09
Paid: 30/09

Announced: 03/12
Excludes Div: 10/12
Paid: 23/12

PRA (not FCA):

"This statement confirms the PRA will undertake its assessment of firms’ distribution plans beyond the end of 2020, in Quarter 4 2020."
https://www.bankofengland.co.uk/prudential-regulation/publication/2020/statement-on-dividend-payments-and-share-buybacks-beyond-2020