Lloyds rises on report of 70 percent dividend payout goal

LONDON Mon Aug 5, 2013 12:24pm BST

Taxis drive past a branch of Lloyds Bank in the City of London August 1, 2013. REUTERS/Andrew Winning

Taxis drive past a branch of Lloyds Bank in the City of London August 1, 2013.

Credit: Reuters/Andrew Winning

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LONDON (Reuters) - Lloyds Banking Group has told potential investors it expects to pay out up to 70 percent of its earnings in dividends by 2015, the Financial Times reported, sending shares in the British bank up over 3 percent in early Monday trading.

Britain owns 39 percent of Lloyds and is gearing up to start selling shares in the bank after they surged well above its breakeven price of 61 pence.

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 percent 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 percent at 76.3 pence by 0800 GMT, the strongest stock in the European banking sector.

Shareholders have not received a dividend from Lloyds since its ill-fated rescue of rival HBOS in 2008, when it was bailed out by Britain and ordered to halt payouts.

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 5 billion pounds of shares - or a quarter of its stake - to institutional investors, such as pension and hedge funds, this week, sources told Reuters on August 1.

If it does not kick off the share sale process this week, it is likely to wait until September due to the market slowdown during the August holiday period, bankers said.

(Reporting by Steve Slater in London and Richa Naidu in Bangalore; Editing by Leslie Gevirtz and Mark Potter)

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