Member Info for tophat

The latest analysts' consensus figures for Lloyds can be found using the link below.

https://www.lloydsbankinggroup.com/assets/pdfs/investors/financial-performance/lloyds-banking-group-plc/2023/q3/2023-lbg-q3-consensus.pdf

Bricton

“Excluding any world events !”

One event on the horizon is the possible US Government shutdown. The US government is only funded until 30th September and there is little sign that a new budget will be agreed before then.

US finance bills originate in the House of Representatives, which is currently controlled by the Republicans. Unlike previous disputes when the House, Senate and/or President were in different parties and were fighting each other, the Republicans in the House cannot agree amongst themselves.

Some republicans want severe cuts in government spending but others want very severe spending reductions! They are also trying to get anti-immigration and anti-abortion measures into the spending bill.

Whatever they come up with has to be approved by the Democratic controlled Senate and president Biden, a Democrat.

Who knows how the markets will react if there is no agreement

LWHL

While some companies may use EPS as a metric to determine executive bonuses, neither Barclays nor Lloyds do.

The financial criteria for Barclays in 2022 were-

1) Profit before tax with CET1 ratio underpin and

2) Cost to income ratio

The criteria changed at the AGM this year so for 2023 to 2025 the financial criteria are-

1) Cost to income ratio

2) Return on tangible equity (RoTE)

3) CET1 ratio

4) Relative total shareholder return

My numbering does not relect the importance of each factor.

The latest analysts' consensus figures are for an increase in half year div from 6.2p to 6.5p with the full year div increasing from 19.6p to 20.1p. Lets hope they are right.

https://www.mandg.com/~/media/Files/M/MandG-Plc/documents/investors/2023/mgplc-consensus-pdf-august-2023.pdf

The latest analysts' consensus figures for HSBC can be found using the link below

https://www.hsbc.com/-/files/hsbc/investors/investing-in-hsbc/pdf/230829-consensus-financial-estimates-for-hsbc.pdf

AceofClubs

You totally ignore the fact that the regulatory framework has totally changed since 2008. Banks and insurance companies have to hold not only a lot more capital than they used to but it also has to be of a much higher quality. Many things which counted as capital back then no longer count. If the current regulations were applied to Aviva back in 2008 they would be struggling to raise a lot of capital, not paying dividends. The additional capital would have to cover not only the current business but also the many businesses that they have disposed of since 2008.

“In 2020 AVIVA had a major wobble and paid 13p!”

The PRA asked insurance companies to be prudent with their shareholder distributions because of the uncertainty due to the covid outbreak. Paying attention to the PRA is a sensible thing to do as if you upset them too much they can bite!

Overall Aviva is in a far stronger financial position than it was in 2008 and I’m pleased I have my investment in it today rather than back then.

StrollerB

Yes it is an investment banking service. Lloyds do a small amount of investment banking on behalf of their existing business customers. This is just the kind of low risk business they should be doing as they are covered no matter how the price moves.

The RNS is a requirement as the market has to be notified in advance that the SM’s are waiting. Normally the RNS is only released by the issuer but I suspect Lloyds are being cautious and have issued one themselves.

Seany123

“What does the RNS mean anyone?”

Mizuho Financial Group Inc are going to issue securities and Lloyds is acting as one of the stabilization managers (SM’s). This is done to prevent anyone from shorting or otherwise trying to force down the value of the new issue.

The mechanism works like this. The prospectus for the issue will have a clause allowing them to issue up to say 105% of the amount to be issued. If for a period, normally 30 days, after the issue, the SM’s threaten to short the excess 5% at the issue price! If anyone tries to force down the price then the SM’s will buy the 5% excess on the open market at a price lower than the IP thus supporting the price and allowing them to close the short at a profit.

On the other hand if the price rises above to IP which threatens the managers with a loss on the short, the issuer will issue the additional 5% to the SM’s at the IP allowing them to close the short without loss. The SM’s normally charge a fee for this.

SUFCESSEX

‘I the hell of me cannot believe they allow ''off the book trades ''’

I suspect that most of these transactions are to do with the share buyback. GS buy the shares on the open market (which is reported on market) but then sells the same shares to Lloyds for the same amount as they paid but those transactions are “off book”.

There are other good reasons for allowing trades “off book” or as I prefer “off market” transactions. In the old days, when shares were held in certificate form, it was not unusual for someone to bequeath their shareholding in company “X” to a friend or family member. The executor or trustee would issue a transfer request to the registrar and the change would not appear on any market and avoided the sale and repurchase of the shares. This still happens today albeit less often.

There is nothing wrong with a private transaction for the trade of shares between two entities. The current arrangements may be different, but in the past the transfer forms lodged with the registrar for such transactions had to include either a declaration that the total value of all linked transactions was below £1000 or a certificate from the taxman confirming that all necessary taxes had been paid. There were/are of course rules to try to spot multiple linked transactions below the limit and are there to prevent people from trying to transfer wealth without the source being known or the appropriate taxes being paid.

Incidentally the record date for things such as dividends or rights issues is the last date which registrars accept changes to the register which will affect the event. The record date is always after the “Ex” date which gives time for the brokers to submit their relevant trades to the registrar. However the registrar should accept private transfers on the record date as to them there is no difference between a submission from a broker or a private transfer.

Houndodg10

The white elephant in the room regarding the capital situation is the pension deficit. Last year Lloyds paid £1.6bn in dividends but £2.2bn in pension contributions. The latest information we have is that Lloyds still expect the outstanding amount for the triannual valuation to be below £2.0bn and they hope that they will not have to pay a variable contribution in 2023 (last year the variable contribution was £1.4bn).

It is still expected that an agreement with the pension trustees will be made by the end of the Q3 2023 but no further details have been announced. Obviously the outcome of the pension review can make a big difference to the amount available for shareholder distributions.

As Hounddog10 mentioned yesterday the profit from the insurance business will be hit by the change from IFRS4 to IFRS17. However the important thing to note is that the change makes no difference to the capital of either Scottish Widows or Lloyds itself. Shareholder distributions e.g. dividends and buybacks are paid out of excess CET1 capital, not profit, so the change does not make any difference to the amount Lloyds will have to distribute to shareholders.

Davesgold

I’m not a holder of either AV.A or AV.B but don’t think there is anything to worry about. Given the mess that Aviva made about redeeming the preference shares in 2018, and subsequent criticism they received from MP’s and regulators, it is unlikely that they would attempt another redemption.

At the AGM on 4th May 2023, resolutions were passed authorizing the board to buy back the entire issues of both AV.A and AV.B. The 2022 annual report shows that the total market value of these was £247m so if they wanted to get rid of them then buying them on the open market would make more sense than risking another mess.

One other thing to consider is that even if the preference shares stop counting towards capital there is no compulsion to get rid of them. Yes the coupons are high and I’m sure the company would like to see the back of them, but the case for this reduces as interest rates are rise.

Skier1

You have to be careful when making long term comparisons between share prices.

BT had a rights issue, were forced to de-merge O2, and issued new shares to pay for the takeover of EE.

A direct comparison of the SP is meaningless.

With Barclays trading at a discount of roughly 50% to TNAV I think the window of opportunity has been around for quite some time now.

The dividend accrual in Q1 was 21bps of CET1 which equates to just under 1.5p per share. Of course just because it has been accrued doesn’t necessarily mean it will be paid.

For comparison the Q1 accrual last year equated to just under 1.1p per share and the full year 2022 div will be 2.4p, providing the final is approved at the AGM.

XD date is 12/05/2023 with payment on 23/06/2023.

Interestingly, in the Q&A which is still ongoing, Noel Quinn pointed out that the CET1 dividend accrual is higher than the announced dividend. That means they still have capital available for distribution as a dividend.

Sorry the figures should be cents per share rather than pence.

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.