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Lloyds share price subdued amid HBOS fraud fine

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Lloyds’ share price (LON:LLOY) has fallen into the red in today’s session, as the bailed-out lender suffered a £45.5-million fine over failing to disclose suspicions of a fraud at its HBOS Reading unit. The scheme saw corrupt employees at the division impose a firm of turnaround consultants on their small business customers in exchange for bribes.

As of 14:36 BST, Lloyds’ share price had given up 0.51 percent to 58.09p. The shares are underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.13 percent lower at 7,414.67 points.

Lloyds fined over HBOS fraud

The Financial Conduct Authority (FCA) announced in a statement today that it had fined Lloyds’ Bank of Scotland (BOS) unit £45.5 million for failures to disclose information about its suspicions that fraud may have occurred at the Reading-based Impaired Assets team at HBOS. The financial watchdog found that the lender had “failed to be open and cooperative and failed to disclose information appropriately to the then regulator, the Financial Services Authority (FSA),” having identified suspicious conduct in early 2007. It was, however, not until July 2009 that BOS provided the FSA with full disclosure in relation to its suspicions.

“BOS’s failures caused delays to the investigations by both the FCA and Thames Valley Police,” Mark Steward, Executive Director of Enforcement and Market Oversight at the FCA, commented in the statement. Lloyds commented on the fine, noting that the watchdog had judged the lender’s failure as ‘not intentional’.

‘Dark period’ in HBOS history

“Since the acquisition of HBOS, the Group has ensured tighter controls, more robust risk management and an entirely different culture than was evident during the fraud,” the bailed-out lender said in a statement. The group’s chief executive António Horta-Osório meanwhile called 2007-2009 ‘a dark period in HBOS’s history’.

RBC reaffirmed the FTSE 100 group as an ‘outperform’ this week, arguing that the company was the most capital generative of the UK banks and offers a consistent dividend yield of 11 percent. According to MarketBeat, the blue-chip group currently has a consensus ‘buy’ rating, while the average target on the Lloyds’ share price stands at 71p.

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