Broker snap: Lloyds' profit and dividend disappoint, says Jefferies

3rd Feb 2014 10:14

Lloyds Banking Group is expected to report a 'small' statutory loss after tax after setting aside a provision to cover the cost of compensating customers for mis-sold payment protection insurance (PPI).The lender has put aside £1.8bn in the fourth quarter for PPI and a further provision of £130m relating to the sale of interest rate hedging products to certain small and medium-sized businesses. As a result the group predicts a 'small' statutory profit before tax for the year, and a pro-forma fully loaded common equity tier 1 ratio of 10.3%, in line with guidance.The lender forecasts 2013 underlying profit of £6.2bn, missing Jefferies forecast of £6.4bn but beating the consensus of £5.8bn.Lloyds also said it expects talks with the UK regulator to restart its dividend payments at a "modest level" will begin in the second half of 2014. Jefferies said: "The timing of dividend payouts is consistent with our long-held views regarding repatriation of capital for LLOY. The 'modest level' is disappointing to us as we had factored in a 40% pay-out in 2015, which looks optimistic in light of today's announcement. We would not expect a 50% pay-out until 2018 at best."The broker recommended a 'hold' rating and price target of 69p.Shares dropped 3% to 80.80p at 10: 53 on Monday.RD