Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
The results are due on Tuesday. I presume that they will update the situation of the sale of the French retail business but don’t know if they will comment on the state of the proposed special div if the sale doesn’t happen.
HSBC are reversing the impairment they took in anticipation of the sale and that amounts to c12p per share as opposed to the proposed div of 21p per share
This may influence the Edinbugh review .
https://www.federalreserve.gov/publications/files/svb-review-20230428.pdf
While some companies may use EPS in their calculation of executive bonuses Aviva do not. There are four financial targets which are Gross cash remittances, Solvency II OFG, Group adjusted operating profit and Cumulative cost reduction.
TFE
As governor to the bank of England, Andrew Bailey had to be restrained in what he said to the Treasury Select Committee re SVB and Credit Suisse. Paul Tucker, former deputy governor of the BoE and John Vickers, former chief economist at the BoE were far more outspoken in their evidence to the House of Lords Economic Affairs Committee.
In 2019 the FED deliberately chose not to implement resolution plans for medium size regional banks, such as SVM, Signature and First Republic so when they got into difficulties the US authorities had no plans in place and were making things up as they went along. This didn’t inspire confidence in the markets.
Credit Suisse has large subsidiaries in both the UK and US so although the Swiss regulator was the lead authority, there was a plan in place, agreed by all three regulators, on how to deal with the bank if it got into serious trouble. The plan called for the regulators to act in a coordinated way however the Swiss authority ignored it and, as in the US, made ad hoc decisions.
Separately in evidence to the US Senate Committee on Banking, Michael Barr, the Federal Reserve Board of Governors Vice-Chair, said that regulators had found “deficiencies” in SVB’s liquidity risk management in late 2021. A Treasury Department official said that a report on the failures will be released by May 2023
Asberger1
No-one knows how much the deficit will be or what will be agreed with the trustees.
However assuming that Lloyds is correct and the deficit is below £2bn then if the trustees agree to maintain the fixed contribution at £800m and waive the voluntary contribution then the deficit would go in less than 3 years.
If the current arrangement is maintained and the capital distributions are the same then deficit would be largely gone in 2023 with any outstanding amount immaterial to Lloyds.
Asperger1
“What are they doing with the other £2bn profit given they are already over capitalised???”
Lloyds paid £2.23bn into the pension funds, £800m in fixed contribution and £1.43bn in variable contributions.
The latest information on the pension deficit was given by Charlie Nunn at the Morgan Stanley European Financials Conference on 14th March. They are still negotiating with the pension trustees over the latest triannual valuation and expect to reach agreement with the trustees in Q3 2023.
Although the final figure has not been agreed, Lloyds expect the deficit to be under £2bn and are hoping that the trustees will agree to an end of the variable contribution. I would be very surprised if Mr Nunn mentioned this without it being a reasonable possibility.
Aviva are holding a General Meeting following the AGM to vote on a proposed capital reduction. The details can be found using the link below.
https://otp.tools.investis.com/generic/regulatory-story.aspx?newsid=1676049&cid=759
This is not a new concept.
All of the major UK banks maintain packages of high quality assets pre-approved by the BoE which can be used as collateral for loans from the central bank.
This avoids the need to sell the assets and incur losses. Assets such as gilts will ultimately be redeemed at par so the short term value is not a major concern.
This means that the banks have rapid access to additional liquidity.
Adewins
Yes it is a risk that investors take on when they buy bank shares. If they didn't know about it before they bought then they didn't do their research properly and if they did know about the risk then they shouldn't complain about i when it happens.
NervousNelly
The guidance for the 2023 div last year was c32.5p which if you divide £915m by the current number of shares is approx. 32.5p. As other posters have mentioned the buyback should increase the div to over 33p per share. If this doesn’t happen then the £300m will have bought far fewer shares than expected and we’ll have the consolation of a considerably higher SP.
Chid
“When Lloyds was in the 80's and after doing basic research it did seem there was no obvious reason for it to fall to the lows it did, as it was deemed a safe, but dull bank.”
Presumably your basic research didn’t uncover the fact that historically the SP for banks can be very volatile - and for good reason. Their business model is inherently unstable! They take in short term deposits and give out 25 year mortgages. If too many depositors want to withdraw their cash at the same time (a run on a bank) they won’t be able to pay everyone. That is one of the reasons that banks are so heavily regulated.
Any bad news can spook both depositors and shareholders, hence the volatility. The last ten years or so have just confirmed that this is not a thing of the past!
The UK rules are there to protect all shareholders. One common related party transaction which occurs in the USA is the directed buyback where the company buys back shares from specific shareholders rather than on the open market.
Directed buybacks do have their legitimate uses. The NWG board have authority to buy up to 4.99% of their issued ordinary shares in any one year from the government. The authority was given at an AGM and has to be renewed by shareholders, excluding HMG, every year at the AGM. Most NWG shareholders see that getting rid of HMG as a shareholder is a good thing. However I’ve read of many complaints about this practice in the US where the price paid is at the top end or above the market rate and there was no good reason not to buy on the open market.
I wonder how many related party transactions ARM would be making and who would be benefitting from them?
krustysmegma
The proposed final dividend is 60p following an initial div of 110p in July making a total for 2022 of 170p.
Persimmon have stated that it is the boards intention to at least maintain the 2022 div for 2023.
850Commando
Why does this share always get hit so hard when there is a bit of a down turn ?.
Because it is a retail bank!
Retail banks are inherently unstable because of the maturity transformation they provide. They take short term deposits and give out 25 year mortgages. If too many of the depositors ask for their money back at the same time (a run on the bank) then they would be unable to pay all of them. That is one of the reasons banks are so heavily regulated.
Bad news can sometimes trigger undue withdrawals. Shareholders, particularly retail ones, seem to want to get out fast which creates a high level of volatility in the SP. This gives rise to a secondary effect. Day traders and people looking for short, even very short term profits need volatility in the SP to make money so are attracted to banking shares. They want to be the first in when the market is rising and the first out when it is likely to fall. This just amplifies the overall effect.
KDropper
“My biggest beef with buybacks is they should not be used to make it easier for the board to reach various bonuses”
The targets for the Lloyds executive bonus scheme are split 50/50 between financial and non-financial targets. The three financial targets are Profit after tax (20%), Return on Tangible Equity (20%) and costs (10%). Paying a cash dividend or using the the cash for a buyback makes no difference to these figures.
The target with the largest weighting is a measure of customer satisfaction (25%).