Shares in Lloyds Banking Group (LON:LLOY) are poised to record a gain this year, which was marked by the lender’s return to full private ownership following its taxpayer-funded rescue during the financial crisis. And while investors have a lot to cheer, with Lloyds’ share price also on track to outperform the benchmark FTSE 100, it has not all been smooth sailing for the group, which is currently being sued by shareholders over its disastrous acquisition of HBOS.
Lloyds recovery continues
Perhaps the biggest event for Lloyds this year was the lender’s long-awaited return to full private ownership in May, which marked a major milestone for the lender, rescued by the government during the financial crisis with a £20.3-billion bailout, leaving the taxpayer with a 43-percent holding in the bank.
Lloyds ongoing post-crisis recovery has also been underscored by the relatively recent return of the lender’s dividend. For the half year, the group declared an interim payout of 0.85p per share, marking a 13 percent rise year-on-year, and has signalled that its board will consider the distribution of surplus capital alongside the group’s full-year results on February 21, when Lloyds is also scheduled to update investors on its strategy going forward.
While the FTSE 100 lender is still quite far away from becoming the dividend powerhouse it was before the financial crisis, the group’s recovery story is undoubtedly holding appeal for both analysts and investors.
HBOS woes haunt lender
Despite Lloyds’ return to private hands, not all ghosts of crisis past have dissipated along with the government’s holding in the bank. The company’s ‘disastrous’ acquisition of HBOS is still haunting the bailed-out lender, with shareholders having taken Lloyds to court, claiming that information about lifelines provided to HBOS from the Bank of England and the Federal Reserve was not disclosed at the time they were asked to vote on the transaction.
A fraud which took place at HBOS’ Reading office prior to the acquisition is also weighing on Lloyds, which earlier this year pledged to compensate victims of the scheme that saw two corrupt employees impose a firm of turnaround consultants on their small business customers in exchange for bribes.
So, while Lloyds’ recovery has outpaced that of bailed-out peer Royal Bank of Scotland Group (LON:RBS) in terms of ownership, dividend and profitability, there are still challenges ahead, including the ongoing Brexit uncertainty, and investors have a lot to both look forward to and eye with caution next year.