There is quite a bit of talk in the press for the past several weeks about capital strategy and dividends for investors of the Lloyds Banking Group. Notwithstanding market and regulatory headwinds, some believe this is a bank which can return progressively greater amounts of capital to its shareholders over time (for more go to http://www.directorstalkinterviews.com/lloyds-banking-group-plc-a-beaufort-tip-for-2016/412689378 for one such example). This weekend's Sunday Times also sees the potential for some £20 billion of dividends payments over time for investors, with the first £2 billion instillment may begin as soon as regulatory approval is given by the PRA over the near term. Lloyds is somewhat unique with its UK centric franchise, modest exposure to the current set of trouble spots (i.e., energy, FICC markets), strong retail deposit base, and loyal to somewhat price inelastic borrower base (such as clients who enjoy 4% mortgage rates). The markets are expecting a profits report of some £1.7 billion this week, unlike certain other banks which are expected to report weaker earnings on the back of difficult trading and credit market conditions.
The Sunday Times (http://www.thesundaytimes.co.uk/sto/business/Finance/article1670290.ece) and others acknowledge more substantial fines may be forthcoming for Lloyds and PPI policy sales, however a strong domestic economy and loyal client base goes a long way to promote distinguished performance in retail banking... let's see how these dividend plans actually work out with the regulator next. There is a lot of risk governance here to contemplate.... adequate capital buffers, supervisory interplay on the dividend policy, a large block-holder (the UK tax payer) and arguably the benefits of a focused strategy and risk appetite framework.
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