Blog Coverage: Lloyds Banking Becomes Private Following UK Government's Stake Sale
Upcoming AWS Coverage on Banco Latinoamericano de Comercio Exterior Post-Earnings Results
LONDON, UK / ACCESSWIRE / May 18, 2017 / Active Wall St. blog coverage looks at the headline from Lloyds Banking Group PLC (NYSE: LYG) ("the Group") as the Company announced on May 17, 2017, that the UK government has sold its last remaining shares in the Group. This step enables the financial institution to become a fully privately owned organization. Register with us now for your free membership and blog access at:
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One of Lloyds Banking's competitors within the Foreign Money Center Banks space, Banco Latinoamericano de Comercio Exterior, S.A. (NYSE: BLX), reported on April 21, 2017, its results for Q1 2017 ended March 31, 2017. AWS will be initiating a research report on Banco Latinoamericano de Comercio Exterior in the coming days.
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Sharing his views on the matter, António Horta-Osório, Chief Executive of Lloyds Banking Group said:
"Today the Government has sold its last shares in Lloyds Banking Group, receiving more money than was originally invested. Six years ago, we inherited a business that was in a very fragile financial condition. Thanks to the hard work of everyone at Lloyds, we've turned the Group around. But the job is not done. We're going to continue to use our strong position to Help Britain Prosper."
Turnaround of Lloyds Banking Group and recent Achievements
The credit for the turnaround goes to Antonio Horta-Osorio, the CEO of the Group. His strategies and persistent efforts have enabled the Group to gain its financial strength and profitability. The Group has over the last few years focused on cutting costs, strengthening its balance sheet, reducing its international exposure and risk, selling off unviable business units, etc. It started paying dividends to its stakeholders from FY14.
Following the Bank of England's 2016 stress testing of the UK banking system, Lloyds Banking emerged as one of the best performing banks in UK. For FY16, the CET1 ratio of the Group was 13.8% (post dividend). CET1 is a measure of bank solvency that gauges a bank's capital strength.
The Group has reduced its reliance on wholesale funding and in FY16 its wholesale funding stood at £111 billion. It has also simplified its business strategy by focusing on local business and presently 97% of its business is now in the UK.
The Group emerged as the most profitable bank in UK for the period from 2012 and 2016. The Group has paid a dividend of over £5 billion to its shareholders.
The Backdrop
UK Financial Investments Limited (UKFI) manages the UK Government's shareholding in the Royal Bank of Scotland and the Group. UKFI was formed in 2008 to manage Government's shareholding in banks, which it had acquired as a part of the bailout package given to the banks due to the financial crisis following the collapse of Lehman Brothers. As a part of the bailout, UK Government had invested over £20.3 billion and acquired 43% stake in the Group. The Group had reported a loss of over £25 billion in 2008 as Lloyds TSB took over Britain's biggest lender, HBOS for £12 billion.
Since 2013, the government has been slowly reducing its stake by selling off the shares in the Group. UKFI had announced in October 2016 that UK Government's Treasury would sell the shares of Group over a period of 12 months as per a pre-arranged trading plan. As per the plan, the stake sale was expected to be completed before October 06, 2017. UKFI had roped in the services of Morgan Stanley & Co. International PLC for this purpose. At the time of announcement, UK Treasury owned approximately 6.5 billion ordinary shares, or approximately 9.1% stake in the Group.
By the start of FY17, the UK Government owned only 5% stake in the Group. The last remaining 0.25% stake, or 638,437,059 shares, was sold off by the UK Government early investment of £20.3 billion from stake sale in the Group.
After the UK Government's exit from the Group, the Royal Bank of Scotland remains the only bank with 73% stake still owned by the government and has still to emerge from the setback and make a recovery.
Stock Performance
At the closing bell, on Wednesday, May 17, 2017, the stock closed the trading session at $3.76, slightly climbing 0.53% from its previous closing price of $3.74. A total volume of 8.79 million shares have exchanged hands, which was higher than the 3-month average volume of 7.72 million shares. Lloyds Banking's stock price gained 15.69% in the last month, 9.30% in the past three months, and 23.28% in the previous six months. Moreover, the stock surged 21.29% since the start of the year. The Company's shares are trading at a PE ratio of 21.36 and have a dividend yield of 2.39%. At Wednesday's closing price, the stock's net capitalization stands at $66.88 billion.
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