Out of all the banks accused for their notorious share in the infamous PPI mis-selling scandal, a major name that has been looming around since the beginning of the scandal is Lloyds Banking Group.
People may be talking about millions stuck with Barclays and the PPI compensation to be received from RBS, but Lloyds seizes the limelight when it comes to the mis-selling regime. It is not only the bank that has been accused the most, but is also one of the first offenders of the scandal.
The bank has been reported to set aside billions specially to take care of the PPI issues faced by its clients and the mis-sold customers. However, people were shocked when the Chief Executive of Lloyds, Antonio Horta-Osorio, announced an extra dividend to their shareholders amounting to £2.2 billion. This is because the bank made a mammoth profit in the year of 2016.
In spite of several other accusations made to the bank, the profit made by the bank raised several eyebrows across the country. This is why all the investors are curious for the annual results of the bank to be announced in the last week of February, 2018.
The value of the bank’s shares remains the same as they were in the precious year in spite of several recommendations to buy their shares after he profit. Also, the bank gave a promise of dividend amounting to more than 7% in the next three consecutive years for the investors willing to invest in the money.
Horta-Osorio is likely to declare his plans on behalf of the bank on the 18th of February this year to which majority of the country is waiting for. He has also promised to chart out a detailed plan for 2018-2020 and to declare the full-year results for the current financial year publicly when he makes his famous statement this week.
Monitoring Lloyds’ share prices, Brexit, and the impact of PPI refunds
There are several speculations about the measures to be taken by the bank and the share prices to be quoted by them after fighting with the infamous PPI battle. After looking at the bank’s previous earnings, Lloyds is assumed to be a superior banking power for the years to come. It is also speculated that the bank would announce an additional share capital of 1.2p per share in case of special distributions, which are most likely supposed to be the share buy-backs.
The analysts have been watching all this very carefully. UBS are of an opinion that the shares would amount to nothing less than 85p per share, with Lloyds having the potential to outperform every other bank in the year of 2018. The other bank that was equally assumed to emerge glorious after facing huge downfalls due to constant PPI checks and refunds was Barclays and its card company, Barclaycard.
A major reason behind this is also the fact that majority of the investors have now become occupied with the issue of uncertainty looming over the Brexit talks. This leaves the domestic banks undervalued as compared to the ones functioning in the Eurozone, especially HSBC and Standard Chartered.
The UBS analysts have made another statement while previewing the coming season of banking results. They are saying that there is a fair possibility for the banking stocks to be re-rated only if the UK government agrees to a transition agreement with Europe. This would also be effective if the UK is capable of delaying Brexit until 2021.
Lloyds and their goal moving forward, post-PPI
After the dark period of dealing with the issue of PPI and making compensations on a daily basis, Lloyds along with the RBS has promised to provide their investors and shareholders with a suitable degree of comfort that would revolve around the ability to manage the ardent costs.
Lloyds has also declared that it would make an update in the further requirement going forward, with an assumed Common Equity Tier 1 (CET1) ratio to be 13.7%. This is much better compared to the previous year where the bank paid dividends to a level of as low as 13%.
In the previous years, majority of the provisions were dominated by the issue of PPI. This year, Lloyds added an amount of £1 billion to bring the total compensation amount to be a whopping £18 billion.
In spite of this huge amount being set aside, UBS analysts still feel that there will be a need of an extra £500 million for PPI, as the average weekly claims are still around £11,000 every week.
However, Lloyds still believes that they would generate enough capital in order to finance a dividend capable of yielding 7%-9% in the years 2018-2021. No matter what statements are made against the bank, Lloyds is currently beating UBS’ estimations by earning 8.7 times more than the estimates made for 2018.
Another twist in the tale, this time from Barclays.
Barclays was supposed to have a share target price worth of 225p. it has come as a shock to everyone as the figure was announced after the bank’s earnings being reduced by 10% because of the poorer revenues available in the capital markets. This is purely on the basis of how the bank is currently performing in the market.
The financial analysts also add that banks like HSBC and Standard Chartered also have a fair deal of their shares to prove regarding their annual results on 27th of February, 2018.
However, the issue looming over the RBS in spite of the bank making considerable profits after years is that of an uncertainty about the scale regarding the settlement of the bank with the US Department of Justice. This issue arose when the bank asked for help from the US due to the mis-selling of the mortgage-based securities that were residential in nature.
Nevertheless, all eyes will be on Lloyds, the front-runner of PPI scandal as it would chart out its records and plans for the years to come after recovering from the fatal blow called PPI!