Lloyds Gets Capital Relief From Bank of England Risk Change
(Bloomberg) -- Lloyds Banking Group Plc has been given more breathing space on its capital requirements, paving the way for higher shareholder payouts this year.
The change, stemming from a revision by the Bank of England's Prudential Regulation Authority, would allow the bank to lower its targets for its CET1 ratio, a measure of capital strength, to around 12.5 percent, from 13 percent, according to a statement on Wednesday. That could free up about 1 billion pounds ($1.3 billion) in excess capital for the lender, according to analysts.
Britain's largest mortgage lender signaled it's mulling share buybacks and dividends as a result of the move. Lloyds' shares rose 1.7 percent to 63.6 pence at 8:56 a.m. in London trading.
“The group has a progressive and sustainable ordinary dividend policy and the board will continue to give consideration to the distribution of surplus capital at the end of the year,” the bank said.
Jefferies Group LLC analysts Joseph Dickerson and Aqil Taiyeb said the BOE cut its requirements more than the market expected, leaving Lloyds with about 1 billion pounds of excess capital that could be used for a buyback this year.
“This is the first example we can think of where one of the large quoted U.K. banks has actually reduced its capital requirement, after a number of years of upward revisions,” said Shore Capital Group Limited analyst Gary Greenwood in a note.
The PRA also said Wednesday that Royal Bank of Scotland Group Plc's systemic risk buffer rate would be 1.5 percent, while Barclays Plc, HSBC Holdings Plc and Banco Santander SA's U.K. unit would be 1 percent. The rates apply from Aug. 1.
Lloyds is due to publish its first-quarter results on Thursday.
The review comes days after Deutsche Bank highlighted an improving picture for its capital requirements, as a result of changes to the way the Financial Stability Board judges its importance in the global banking system.
What Bloomberg Intelligence Says
“This will release about 1 billion pounds more for distribution to shareholders, and also signals the regulator's growing comfort with the outlook for the bank and Brexit.”
--Jonathan Tyce and Georgi Gunchev - banks analysts
To contact the reporter on this story: Silla Brush in London at sbrush@bloomberg.net
To contact the editors responsible for this story: Ambereen Choudhury at achoudhury@bloomberg.net, Marion Dakers
©2019 Bloomberg L.P.
-
Talking Points This Week: Tech Nerves, FII Buying, And A Faraway Banking Shock
The global markets are not shining this Diwali. The exception in the large markets is, India.
-
Midterm Rally Lasted A Day. The Hard Reality Of A Divided US May Last Two Years | Opinion
Between a contested AI boom, a debt ceiling that arrives in 2027 and a president with every incentive to act alone, the next two years may prove more volatile than the first day's rally suggests.
-
Blue Wave Will Derail the AI Trade but Won't Dismantle the AI Era | Unhedged Position
The Democrats' sweep of the US Congress will see politics collide with economic forces both over the long and short term.
-
It's Time To Take The GST Council's Bet On Trust Global
Payment records can prove India's services exports, and clear, proportionate rules can bring foreign digital sellers into the tax net.
-
Opinion | India at 38: From Innovation Overperformer to Innovation Powerhouse
India now has 453 VC-backed deep science startups, 18 of them late-stage, after 117 percent growth since 2020. Laurus Labs, at USD 9.3 billion, is the most valuable deep science company in any middle-income economy outside China.
-
Navigating Energy Crossroads: S Jaishankar's Call For Diversified Supply Chains At G20 Ministerial Meeting
As geopolitical fault lines continue to test maritime trade routes and commodity flows, Jaishankar's message remains pertinent: true economic resilience requires open markets, protected transit lines, and a genuine commitment to multilateral cooperation rather than coercion.
-
Indians Are Travelling, But Not Every Journey Is A Holiday | The Week In Whys
Pilgrims, patients and working women are the real travellers, and the system hasn't quite caught up with them.
-
Getting To Work Costs Women More | The Reason Why
It is not just about women paying more than men. It is about women paying much more in cities than in villages.
-
AI Bias In Investing Cannot Be Eliminated, But It Can Be Governed
Framing is a particularly important example as identical financial information presented in terms of gains rather than losses can lead an LLM to reach a different assessment.
