iNVEZZ.com Friday, March 14: Lloyds Banking Group (LON:LLOY) had chosen to sell more than 600 branches to the Co-op rather than NBNK because execution risks were lower and it would have been more attractive for employees and customers, the bank’s minutes from a board meeting in December 2011 showed. “While it was difficult to assess which buyer would be more acceptable to customers, Ferrari [codename for Co-op] was a well-known, ethical brand that had weathered the financial crisis well.”
Since then Co-op Bank has been shaken by a series of scandals, including a ₤1.5 billion capital hole in its balance sheet. Lloyds’ minutes were published today by UK lawmakers examining the proposed sale of 632 branches to the Co-up, which was agreed in 2012 but failed in April 2013 when the Co-op’s problems were uncovered. The Bank of England is convinced that the Co-op had shared its concerns about its capital position to Lloyds, although executives from the bank have stated that they didn’t know there was a problem until December 2012. “It was understood that, although discussions were not yet complete, the FSA (Financial Services Authority) did not have any fatal concerns about the Co-op's interest in acquiring the Verde (branches) business,” the minutes stated.
Lloyds’ ECNs soar in value as bank plans to swap them
The price of Lloyds’ enhanced capital notes (ECNs) surged in recent weeks after the bank announced it planned to swap them for contingent convertible (CoCo) bonds (Lender offers to exchange ECNs for ₤5 billion of riskier bonds).
While there are ₤8.4 billion of ECNs, the bank is issuing only ₤5 billion of the new bonds. As a result investors have rushed to purchase the ECNs, which are most likely to be converted. The most popular note has been the 2020 LBG Capital note with a coupon of 11.04 percent. At the start of the year its price was around 108 percent of face value and then it jumped to 117 percent. Yesterday it was at 115.5 percent.
“The new securities come in minimum units of £200,000 which is too large for most retail investors’ portfolios, so private investors are excluded from this swap,” commented Darren Ruane from Investec.
Analysts on Lloyds
Societe Generale reaffirmed its ‘buy’ rating on Lloyds’ shares in a note sent to investors on Wednesday. It gave the stock a price target of 94.00p, indicating a potential upside of 18.85 percent from today’s opening price of 79.09p. Presently, five equity analysts rate Lloyds as a ‘sell’, nine give it a ‘hold’ rating and 20 are calling it a ‘buy’.
As of 13.51 UTC buy lloyds shares at 78.36p.
As of 13.51 UTC sell Lloyds shares at 78.34p.