Lloyds wins appeal over high-interest bonds

10th Dec 2015 11:16

(ShareCast News) - Lloyds Banking Group shares popped higher after the bank said it has won an appeal to buy back high-interest bonds early.Lloyds said the Court of Appeal found unanimously in the group's favour that a capital disqualification event, as defined in the conditions of the enhanced capital notes, had occurred.The judgment, which overturns a previous ruling in June, gives the bank the right to redeem any series of ECNs at par, meaning it will be able to save on interest payments.The ECNs - which paid high annual interest of 6% to 16% - were issued by the bank in 2009, not long after it was rescued by the government, as it looked to prop up its capital buffer.However, regulatory changes meant the ECNs were no longer able to count towards banks' capital buffers.Atif Latif, director of trading at Guardian Stockbrokers, said the news takes another key overhang away for the share price, namely due to the significant cost saving for the bank as par value redemption purchase may now be avoided."This coupled with the recent stress test results on UK banks has increased the de-risking of being an investor in LLOY and with this news we see the potential for a strong run from this juncture," he added.Nomura, which rates the stock at 'buy', said the court decision should add even more resilience to Lloyds' net interest margin and thus filter down to further dividend protection.At 1538 GMT, Lloyds shares were up 2.1 to 72.12p.