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Gary59
The comparison between HSBC and LGEN is totally unjustified.
The letter from the PRA to the banks “Requesting” that they cancel shareholder distributions contained an explicit threat to use its statutory powers to block distributions, if the banks didn’t comply voluntarily.
The choice the banks had was between not paying dividends and keeping the regulator happy and not paying dividends and upsetting the regulator.
Upsetting the PRA would have been silly as they could have taken the view that then board and management were less prudent than the PRA had thought and so increased the banks Pillar 2A capital buffer. This is the buffer used by the PRA to take into account the individual differences between banks.
Had this happened the net result would have been that there was less available to distribute to shareholders once distributions resumed.
Muchaboutmoney
Be careful not to associate overall profit or loss with amount available for distribution to shareholders.
There are many things which affect the profit/loss of a bank such as Lloyds which make no difference to the surplus capital from which distributions are made.
Deferred tax assets, goodwill and fair value adjustments of own debt are just three examples of things which can make a big difference to the overall profit/loss for accounting puposes but have no impact on the CET1 and hence distributable funds.
The best example I can think of to illustrate the disconnect between Profit/Loss and shareholder distributions is the final dividend payment, amounting to approx. £1.2bn, by RBS (now Nat West) on its dividend access share.
RBS made a loss of almost £2bn for the Y/E 2015, the eighth year in a row they made a loss which total to over £50bn. However the regulator was happy for RBS to make the £1.2bn dividend payment because of their capital position with a CET1 ratio of 15.5%.
"AB has not added comment to what he has previously said"
Andrew Bailey and three other members of the MPC gave evidence to the Treasury Select Committee yesterday and naturally the MPC decisions on rates and QE were raised. You can watch the session using the link given below.
The TSC oversees the BoE, MPC and FPC on behalf of Parliament, not the government. All senior appointments, including members of the MPC, have to be approved by the TSC and candidates have to appear before the committee and convince it of their independence before being approved. The four MPC members who appeared yesterday voted in three different ways at the November meeting which does suggest their independence.
https://parliamentlive.tv/event/index/dffc6856-a4ef-49c9-b825-e52ac02f4562
Prussell1963
On the subject of dividends, given the surplus capital that Aviva have announced that they are going to return to shareholders, the total ordinary dividend for 2021 will be at least as great as for 2020, i.e 27p per share. However given the company have already increased the interim dividend by 5% it is very likely that the final ordinary dividend, usually paid in May, will be at least 21p.
There would normally be three ways to distribute the £3.25bn of excess capital. Increase the ordinary dividend, pay special dividends, and/or have additional share buy backs. The company want sustainable dividends so a massive increase in the ordinary div is very unlikely! Given the constraints on buy backs, I can’t see that as a viable mechanism for returning that amount of capital in the given time frame. So It looks to me as if there will be one or more special dividends. I won’t speculate as to the quantity.
However as to your point of having a share consolidation linked to a special dividend I have to point out that neither a dividend, special or ordinary, nor a share consolidation adds any intrinsic value to a company or its shareholders. I can’t comment on Tesco but believe that they did the same as National Grid did a few years ago. There were a number of NG shareholders who, incorrectly, thought that they had been cheated out of something. The following was my response which, I hope, will avoid any such complaints on this AV board if there is a simultaneous consolidation.
“There seems to be much confusion about what happened so may I offer this very simple but totally unrealistic analogy which I hope will clarify matters.
Suppose there is a company with 1000 issued shares which pays off all its debts and its only asset is £1000 in a bank account. A shareholder with 100 shares has a holding worth £100.
Suppose now that the company returns £500 to shareholders. Now there is only £500 left in the bank but there are still 1000 shares so each share is now worth only 50p. However the shareholder with 100 shares which had a value of £100 now has 100 shares worth £50, however he also has £50 in cash so the total value is exactly the same.
Now suppose the company has a 1:2 consolidation at the same time as the cash payment. The shareholder who had 100 shares now has only 50 but as there as there are now only 500 in total each one is worth £1 so he still has £50 worth of shares plus the £50 in cash.
From memory National Grid paid out approx. £3bn to shareholders and cancelled the same value of shares. The overall net result should be zero.
For those wondering why a company would do this when it doesn’t affect the overall value it makes it easier for shareholders to make multi-year comparisons of the SP and other financial data because they don’t have to factor in the return of the cash in their calculations.”
onelongrunner
The table gives an indication of the impact of a rate rise on income, not profit. The amount of profit will depend on other factors such as how much of the increase is passed on to deposit savers.
smithy88
Don’t expect any changes to the ring fencing rules just because we are out of the EU. The work done by the UK Treasury Select Committee influenced many regulators and the UK pushed for tighter rules than many countries wanted.
SD235
A limit order may not always be executed even though the target SP is reached. LGEN like all FTSE 100 shares is traded using the SETS system. The buy and sell orders are loaded into SETS and the system uses a strict sequence of rules to match the buys with the sells. Two of those rules are-
“At best” orders take precedence over “limit orders”
Where orders have the same priority the one which matches the highest volume of shares takes precedence.
For example suppose you place a buy order for 5,000 shares at a limit price of 279p and later I place a buy order for 6,000 shares “at best”. If sell order for 9,000 is entered with a limit price of 278p then my order will be executed and your order will remain unfulfilled. First the “at best” order takes precedence but even if that were not the case and both orders had the same priority my order would still get preference because it matches the greatest volume of shares.
In reality it is far more complicated as other factors can also influence the outcome.
The analysts latest consensus figures for Lloyds show a total ordinary dividend for 2021 of 1.99p plus an excess capital distribution of £935m.
https://www.lloydsbankinggroup.com/assets/pdfs/investors/financial-performance/lloyds-banking-group-plc/2021/q3/2021-lbg-q3-consensus.pdf
Brilltrader
For the 2020 financial year Aviva paid the following dividends on their ordinary shares-
24/09/2020 Interim div 6p per share
21/01/2021 Interim div 7p per share
14/05/2021 Final div 14p per share.
I hold Aviva shares in my ISA and also have some certificates from a long time ago.
Both my ISA and bank account were credited with the correct amounts on the dates given above.
If you received only two dividends then you need to ask you broker why.
Regards
William Chalmers, Lloyds CFO, gave an interview to the BofA conference on 21st September 2021.
On capital distributions he said
“We totally recognize the importance of capital returns to investors so… we see capital returns as essential… We put forward an interim dividend of .67p per share in the context of committing to a progressive and sustainable dividend path. It is very important to us that we are able to commit… to both of those two words i.e. progressive and sustainable…
When we look at surplus capital… we will look above and beyond the dividend at the end of the year as the board always does, at the capital position of the group, at the regulatory changes particularly the RWA increases which we expect in the course of January next year. We will look at the macro economic outlook and we will also look at… investments in the business providing that they are value adding and ultimately accretive to shareholders. We’ll look at all of these factors when we look at the capital position at year end and decide upon distributions above and beyond the dividend.
Two points. Just to reiterate the importance of capital distributions as a philosophy and secondly to say the timing of this i.e. at the year end is nothing unusual. As you know Lloyds has always looked at surplus capital distributions beyond the dividend at year end. This year is no different. We recognize what other banks have done for their own reasons but for us it is just business as usual.”
As we are back to interim and final dividends we'll have to wait for the year end as hardup said.
SHAPERITE
A quick calculation from the figures given in the half year results suggests that a 0.25% increase in rates would add approx £200m per year to Lloyds income. However to assess how that would impact the profitability you have to consider the proportion of any rate increase passed on to depositors. Also the large structural hedge which Lloyds has is an important factor. The full impact of the increase will take a number of years to take effect and I remember George Culmer, a previous finance director of Lloyds, saying that the spread of any rate rise would be weighted to years two and three after the rise.
nuri123a
The ECB restrictions on bank dividends don’t expire until 30th September 2021 so the fact that there was no specific announcement on dividends is no surprise. However the half-yearly financial report contains the following paragraph
“The increase of 0.8% is due to a profit after tax of € 0.3 billion (+0.5%) and RWA reductions (+0.6%) partially offset by foreseeable charges in respect of dividends (-0.3%) and a reduction in investment securities (-0.1%).”
This means that they have allocated approx. 180 million Euros during the half year for future dividends. By my reckoning that works out as approx. 6.6 cents per share.
longtimeinvestor
I totally agree that Lloyds could pay more than 2p but strongly suspect that they will stick with the formula.
Lloyds finished the half year with a CET1 ratio of 16.7% after allowing for the interim dividend. However the regulatory changes coming in the new year will reduce that by 1.2% to 15.5%. This needs to be reduced by another 0.3% down to 15.2% to take into account the acquisition of Embark. This leaves 170bps for shareholders.
Since the 0.67p dividend will use 37 bps of CET1 a reasonable estimate of what is available for shareholders is 170/37*0.67 which comes to approx. 3.08p per share.
I doubt that the board will want to pay a total ordinary dividend of more than 2p. Past experience has shown that they tend to be conservative with the ordinary dividend.
However it is reasonable to assume that there will be a capital build in the second half of the year unless there is a serious deterioration in conditions. So the board should have scope for specials and/or buybacks.
longtimeinvestor
Lloyds have a long history of the one third - two third split for ordinary dividends going back to before the the financial crisis.
2015 interim 0.75p, final 1.50p
2016 interim 0.85p, final 1.70p
2017 interim 1.00p, final 2.05p
2018 interim, 1.07p final 2.14p
2019 interim, 1.12p the final was never paid but recommended at 2.25p
Adjustments tend to be made with special dividends like those declared in 2015 and 2016, each of 0.5p.
Lloyds has abandoned its plan to pay ordinary dividends quarterly and has reverted to paying them half yearly. Historically this meant paying approximately one third as an interim and two thirds as a final. With an interim dividend of 0.67p it looks like they have already decided to pay a total ordinary dividend of approx 2p.
In the H1 analysts presentation this morning Jes Staley made a number of comments which show how the board and management feel on the balance between dividends and buybacks.
“The board and management are keenly focused on stock price”
“If we have shareholders who are willing to sell at less than book value then we are willing to buy it”
“We are directing towards a 6p dividend for the year… and we know that income flow, particularly for our retail investors, is particularly important. On the other side when you are trading at 50 to 60% of book value the economics just pushes you towards a buyback”