Lloyds stock up on dividends pledge

Lloyds Banking Group has told potential investors it expects to pay out up to 70% of its earnings in dividends by 2015, the Financial Times reported, sending shares in the British bank up over 3% in early trading yesterday.

Britain owns 39% of Lloyds and is gearing up to start selling shares in the bank after they surged well above its break-even price of 61p. Lloyds chief executive Antonio Horta-Osorio said at half-year results last week that he expects the bank to be a high-dividend paying stock in the future, potentially paying out at least half of its earnings.

The Financial Times said he had told investors he was targeting a 70% ratio, far above British rivals and most global peers, citing people involved in the meetings.

Lloyds declined to comment on the specific payout ratio expected.

The bank’s shares were up 3.5% at 76.3p by 8am GMT, the strongest stock in the European banking sector.

It said on Thursday it would talk to regulators about restarting the payout, helping its shares surge, and was bullish on the long-term prospects for distributions.

“I think it is rather obvious that given our increased returns . . . Lloyds will be a high dividend bank stock in the future because a small portion of our earnings will be necessary to sustain loan growth, and all the rest . . . will be able to flow into shareholders,” Horta-Osorio told analysts.

The government could sell a tranche of about £5bn (€5.7bn) of shares — or a quarter of its stake — to institutional investors, such as pension and hedge funds, this week, sources told Reuters on Aug 1.