For the first quarter of this year, Lloyds Banking Group (LLOY.L) achieved a 22% jump in pretax profit. In fact, the results aren’t bad at all – especially, considering that the bank is very much a recovering patient. It’s still 25% government owned after being rescued during the financial crisis.
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The IG Group’s (IGG.L) Brenda Kelly says that better margins, as well as a 5% decline in costs from a year ago, really helped Lloyds:
“The fact that it doesn’t have any provision for [payment-protection insurance] (PPI), the fact that it has seen a rise in its first-quarter pre-tax profit to $1.8 billion. And I suppose the fact that it is separating the [trustee savings bank] (TSB) is creating a degree of competition in the market.”
And now, there’s been chatter regarding a potential dividend, which would be the very first since taxpayers saved the bank with their £20-billion bailout. Restarting dividends is a key issue for the British financial markets, despite the fact that financial services make up only 10% of its economy. “Certainly the banking sector is a huge, importantLloydsart of the U.K. recovery and, given the amount of revenue it derives and the amount of tax it actually pays into the system, I think it is important that we see success in this particular sector,” Brenda adds.
In return for the bailout, European regulators ordered Lloyds to sell TSB. The float is estimated to take place around mid-June, especially with TSB valued at around £1.5 million.
After its first-quarter results were announced, Lloyds’ shares rose by more than 5%. Not to mention, the prospect of a dividend, which has encouraged many investors. Lloyds used to be one of Britain’s highest-paying stocks.
Lloyds Banking Group ADR (LYG) is the bank’s American Depositary Receipts, which trade on the NYSE. Currently, the ADRs trade around $5.25, down nearly 90% from their peak in 2007.