Lloyds could surprise positively on dividends, broker says

5th May 2015 13:28

Partially state-owned banking group Lloyd's strong capital progress could see the lender outstrip market forecasts for its dividend pay-outs and deliver further cash returns, JP Morgan said in a research note e-mailed to clients on Tuesday.Following the bank's first quarter results on 1 May analyst Raul Sinha said guidance for NIM to increase by more 255 basis points this year should relieve worries about asset margin pressures.Sinha also saw "further NIM upside ahead".We believe that strong capital progress (13.4% CT1) could allow the group to exceed market expectations on dividend, and further cash return.The JP Morgan analyst's estimates on for the bank's dividend per share were already running well above consensus, at 3.5p/4.8p/5.3p for 2015/16/17, respectively, providing the stock with a 6.4% dividend yield plus potential for a special dividend or buy-back."We believe that Lloyds' strong first quarter results will bring its relatively attractive valuation of 9.1 times estimated 2016 price-to-earnings (PE) ratio and 1.3x price/tangible net asset value (TNAV) multiple for 14.7% return on net asset value (RoNAV) into focus at a time when the UK political overhang is close to abating. Lloyds remains our top UK bank pick."