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Billion pound buyback buoys Lloyds as profits jump

Investors welcome big buyback worth 1.4p per share in lieu of special dividend, as profits reach heights not seen since 2006.

 
Billion pound buyback buoys Lloyds as profits jump
 

Shares in Lloyds (LLOY) have rallied as the bank announced a £1 billion share buyback alongside the highest pre-tax profit since 2006.

Lloyds bucked a falling FTSE 100, rising 1.5% to 68.9p, as the bank announced a 24% rise in profit to £5.3 billion for 2017, up from £4.2 billion last year.

Investors were also buoyed by a 2.05p final dividend, which will bring 2017's total payout to 3.05p. While this is up from last year's 2.55p payout from ordinary dividends, it is in line with 2016's total 3.05p, once a half a penny special dividend is included.

But Lloyds has decided against a special dividend this year, choosing to spend the cash instead on a bumper share buyback worth 1.4p per share.

'There's a lot to like in Lloyds' numbers, with profits rising, costs under control, and prodigious amounts of cash being thrown off to shareholders,' said Laith Khalaf, senior analyst at Hargreaves Lansdown 

'The Bank of England can take its fair share of credit for Lloyds' profits, as rising interest rates have delivered a boost to the top line at Lloyds. With more rate rises waiting in the wings, this looks like a tailwind that's going to be blowing behind Lloyds for the foreseeable future.'

Bullishness over the bank was however tempered by profits that fell marginally short of expectations due to a further £600 million charge for compensation related to payment protection insurance (PPI) mis-selling in the fourth quarter, taking 2017 PPI costs to £1.7 billion.

'The final deadline for claims is August 2019, so the company is moving towards the point at which it can leave the debacle behind it, but the total bill already stands at more than £18 billion,' said Russ Mould, investment director at AJ Bell.

The bank revealed alongside the results its three-year strategic plan, involving £3 billion of investment mostly in technology and a bid to amass £50 billion in additional retirement assets from 1 million new pensiuon customers by 2020.

'The government's auto-enrolment programme is now largely in the rear view mirror, which means Lloyds will have to pinch these new customers off someone else, so it will have to sharpen up its toolkit,' said Khalaf.

'One would expect Scottish Widows to play a pivotal role in this pensions land grab, which lends some context to the recently announced prospective withdrawal of £109 billion of assets from Standard Life Aberdeen.'

19 comments so far. Why not have your say?

dyfed

Feb 21, 2018 at 11:57

Am rather dubious about the benefit to shareholders of share buy-back. It's fine if the buy-backs are cancelled: that means share price goes up and the next divi stretches further. But if the shares just go into Lloyds treasury and get reissued at some later date this is arguably a disbenefit it seems to me?

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Andrew Stevenson

Feb 21, 2018 at 11:59

"prodigious amounts of cash being thrown off to shareholders"

Well one should be very grateful for an extra halfpenny (Total payout 3.05p), but the share buyback is not a great help to anybody who intends to hold onto their shares, If the 1.4p buyback puts up the share price that's very nice for the people dumping their shares, and no doubt very nice for the directors who will get a bonus for any increase in the share price, but not a great reward for any of the many thousands who invested their savings in Lloyds shares years ago (in my case when they were £7.89) at share prices they will never see again in their life times.

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halfinchnut

Feb 21, 2018 at 12:49

Very very disappointing dividend, no increase from the payout a year ago, fudging the distinction between special dividend and ordinary dividend is a kick in the teeth for shareholders again, and what's the point of buying shares with hard cash, when the board seem fit to issue a billion new shares a year to give to themselves in bonus's. It's a feeding frenzy for the top people at Lloyds, disguised as a win for shareholders. B stards.

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archie scott

Feb 21, 2018 at 13:04

Yet again senior management more interested in boosting the EPS . Wouldn't be anything to do with being a key yardstick in determining bonuses ?

Shareholders would be better served by returning monies via dividends

Sadly yet another senior management team focussing on naked greed / self interest. And they wonder why some are foolish enough to believe the likes of Corbyn ? Do they never learn ?

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dyfed

Feb 21, 2018 at 13:37

I have started a "black list" : I will no longer buy shares that do "buy-backs" (I may make an exception if the shares are cancelled). So that's NG and Lloyds so far.....wonder if we could get a shareholders society onto this as as a campaign...or maybe the press?

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colin overton

Feb 21, 2018 at 14:53

All companies seem to be buying back their own shares, what a waste of money. Either invest to expand the company, pay off debt or increase the div. I'm surprised at Lloyds, they should know better.

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Graham Barlow

Feb 21, 2018 at 14:56

I cannot get excited about Lloyds Bank. I have friends who invested in Lloyds years age at prices that even to day are very high. £6/7 per share. These shareholders were abandoned in the debacle of the useless take over without due diligence, could you ever credit it happening in the City? Now they are abandoning great swathes of the market , with branch closures and leaving a banking desert. They have also gone PC and even suggested opening in Berlin whilst making hundreds redundant in the UK. The buy back is rather odd way of treating the bewildered shareholders who are still looking for some real consideration having never received a penny since 2009 No Lloyds still have a very long way to go before they can look their shareholders in the eye.

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richard tomkin

Feb 21, 2018 at 15:14

@ Barlow. Agree wholeheartedly.Where are the authors of this debacle now - Gordon Brown,Dennis Stephenson,Victor Blank,Eric Daniels,Andy Hornby etc.Never have they accounted for their incompetence.Without our bailout,this bank would be no more.Every time I see that wretched black horse and the slogan " for the journey " I want to vomit.My local branch of Lloyds closes its doors for the last time on May 3rd ; after that,it's a weekly mobile caravan. How they treat people who have supported them over so many years disgusts me.

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Codger

Feb 21, 2018 at 15:19

I agree with the comments. The dividend total is the same as last year, so shareholders gain nothing. As for the share buyback, at best it demonstrates that the company has no attractive opportunities for investment , at a cynical level, it is just a way of proping up the share price. I can’t think of a company that has grown well after share buybacks.

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Micawber

Feb 21, 2018 at 15:30

Compare Lloyds' dynamics with those of Metro Bank whose results are also out today....

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archie scott

Feb 21, 2018 at 15:31

Codger

the only thing that grows after share buybacks are bonuses paid out to senior management and fees earned by city fat cats. That's their whole raison d'etre. Shareholders - they are irrelevant

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deeply realistic

Feb 21, 2018 at 16:06

share price up 2.45p today 4.00. Take the money and run.

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Norman E

Feb 21, 2018 at 17:23

Its high time to make companies get shareholder approval for buybacks. When do we get to vote on director/executive remuneration at Lloyds?

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mikest

Feb 21, 2018 at 17:48

I agree with dyfed – this share buy-back should definitely merit cancellation otherwise, as others have pointed out, the rationale stinks. BARC are no saints, but at least their shares are measured in pounds rather than pennies.

But what about the shareholders court case? If I remember correctly, closing submissions were due today. What will our learned friends have to say about that? I shan´t be holding my breath......

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dyfed

Feb 21, 2018 at 18:44

I wonder, on the basis of the comments above, whether the sub-headline can be justified: "investors welcome etc". Daniel, could you tell us if investors were interviewed and the positive comments statistically significant? Or did u just assume investors would welcome?

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Mr J

Feb 22, 2018 at 02:00

Another vote against buy back from me. We the owners know this is just to enable the board to artificially raise EPS and therefore their own personal bonuses. It would do more for the share price to raise the dividend as well as actually rewarding the owners that the board are supposed to be serving.

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Taurus

Feb 22, 2018 at 09:18

After reading the thread above at least I can now tell myself that I am not going mad. All of the things said reflect exactly what I was thinking yesterday. Buybacks count for little or nothing to those who seek income from dividends (this is a dividend stock) and the dividend has just stood still this year with the promise of very small rises in the future. I can only hope that there are a string of mid-year special divs but that would be expensive to administer and not something Lloyds would want to do whilst still paying off PPI etc

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Tropical Trader

Feb 22, 2018 at 17:23

I very much agree with all the comments regarding the buyback - it does nothing for us shareholders unless the shares are cancelled and I've read nothing that indicates they will. An insult to all long suffering shareholders. A bunch of bandits as far as I can see.

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GODFREYASH

Feb 24, 2018 at 12:31

Who wrote this lead article "buy back buoys shareholders"? Are you completely barking? I've stuck with incompetent Lloyd's managements for years, even when sold a pup by Brown. Did you expect a knighthood Daniels or did Brown think somehow that you were Paul Daniels? Years ago when I, through work pressures, put my portfolio with Lloyds private banking I was told not to sell at £7+ they anticipated £13+ eventually. Even their "kicking boy" financial advisors proved they were as inept as their top managers. What a joker, a black bloody horse would have talked more sense.

The very least they can do is to cancel the shares they buy back or vastly increase the final dividend

Yet another livid shareholder

l

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