Shares in Lloyds Banking Group surged past 100p on Tuesday morning amidst a wider rally in the London stock market’s blue-chips.
The FTSE 100 banking giant jumped over one per cent at the opening bell to 101.30p marking a 17-year high.
Lloyds’ share price has not closed above the 100p mark since prior to the global financial crisis, where the bank’s stock crashed from over 200p to lows of 44p in the space of 18 months.
But over the last year the bank has been one of the key drivers of the FTSE 100 rising nearly 80 per cent in just 12 months.
The FTSE 350 bank index – where Lloyds is the top performer – has outpaced the FTSE 100 with a gain of near 50 per cent compared to the near 20 per cent of the wider index.
The lender was handed a major stock boost after the Supreme Court’s motor finance ruling, which handed banks a lukewarm win. Lloyds profit had previously taken a 36 per cent hit after hiking provisions for the car mis-selling scandal.
But the scandal still threatens to take a chunk out of Lloyds’ bottom line, with chief executive Charlie Nunn warning the current redress proposals from the Financial Conduct Authority (FCA) could wipe 20 years of profit off the industry.
Lloyds to dish out shareholder cash
Lloyds is tipped to dish out over £17bn to shareholders in the year to come, according to analysts at Jefferies.
Analysts labelled the stock its “preferred” in the banking industry following its bumper 12-months.
Jefferies‘ Jonathan Pierce and Piriya Rathod said Lloyds’ “longer than average” structural hedge would boost takings in the year to come. Structural hedging is key strategy deployed by banks to shield profits from interest rate swings.
The bank is set to benefit with old earnings hedged on lower rates maturing and set to be replaced with new ones at the present higher interest rates.
Over £1bn is set to be added to Lloyds’ profit in both 2027 and 2028 from the structural hedge strategy, analysts said.
The £17bn pencilled in for distributions marks a 20 per cent upside to market consensus. But analysts believe a “move to a half-yearly buyback program could add around £1bn to this as early as next year”.
They added Lloyds’ strong hedge meant it “may overtake” its domestic-focused rival Natwest’s return on tangible equity, which measures how efficiently a bank uses its core capital to generate profits.