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Lloyds Has More Money Than It Can Handle, Say Analysts

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http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/7993192/Lloyds-has-more-money-than-it-can-handle-say-analysts.html

Lloyds Banking Group has far too much capital and if it were not for European Union restrictions could be returning billions of pounds to shareholders, according to analysts at UBS.

For every £1 that Lloyds is currently making, it could easily afford to return far more to investors. However, because of EU rules on state-aid, the partially government-owned bank is barred from making any payments to shareholders.

To exit the Asset Protection Scheme (APS), the government-funded insurance scheme, UBS analysts estimate that Lloyds raised £9bn more capital than it actually needed, adding that the continuing improvement in the quality of the bank's assets meant this number would now likely be higher.

"The group is now in a position where essentially it is able to distribute more than its entire earnings while still improving its capital ratios", wrote the analysts.

QE has worked wonders for the banks.

Yippee

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What does this mean, in plain English?

They are in some sort of asset protection scheme - what exactly does it do?

They have raised more capital ... have they had a share sale? Presumably it was successful?

How, exactly, has QE helped them out.

Wish I understood these damn things.

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What does this mean, in plain English?

They are in some sort of asset protection scheme - what exactly does it do?

Nope. They wanted out of that, which is why they raised money. RBS is in it.

They have raised more capital ... have they had a share sale? Presumably it was successful?

They had two big rights issues last year.

How, exactly, has QE helped them out.

Pouring money into the system. Devalues existing money - including savings and debts - by diluting them. Inflates asset prices, which is a one-way bet for a bank's balance sheet. And not least, the bank's exposure to those asset prices is leveraged by fractional reserve.

Wish I understood these damn things.

If you did, you'd wish it were otherwise. Unless you're a wannabe bankster or summat.

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Couldn't they use this 'excess money' to buy back the shares owned by the taxpayer - would the EU allow this?

Then, once the taxpayer share is reduced or removed, money could start filtering back to normal shareholders in dividends etc.

:huh:

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Lloyds Banking Group has far too much capital

Didn't they say that about Northern Rock in mid 2007?

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Couldn't they use this 'excess money' to buy back the shares owned by the taxpayer - would the EU allow this?

Then, once the taxpayer share is reduced or removed, money could start filtering back to normal shareholders in dividends etc.

:huh:

From the LLoyds results announcement in Feb 2010:

"At 31 December 2009, the Group's overall funding support from Governmental and Central Bank sources totalled £157 billion, with a significant proportion (predominantly Special Liquidity Scheme (SLS) and Credit Guarantee Scheme (CGS) funding) maturing over the course of the next two years. The Group's balance sheet reduction plans will avoid the necessity to refinance much of this funding."

I therefore suspect Lloyds will need all that cash and more to help repay SLS etc as repayments start next April (2011)...

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From the LLoyds results announcement in Feb 2010:

"At 31 December 2009, the Group's overall funding support from Governmental and Central Bank sources totalled £157 billion, with a significant proportion (predominantly Special Liquidity Scheme (SLS) and Credit Guarantee Scheme (CGS) funding) maturing over the course of the next two years. The Group's balance sheet reduction plans will avoid the necessity to refinance much of this funding."

I therefore suspect Lloyds will need all that cash and more to help repay SLS etc as repayments start next April (2011)...

So the Telegraph report is rubbish then? There is so much misinformation about, I'm not sure its worth reading up on anything anymore!

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So the Telegraph report is rubbish then? There is so much misinformation about, I'm not sure its worth reading up on anything anymore!

Seems clear to me.

Lloyds have lots of capital that they will need in 2012.

If the state decides they won't need it in 2012, they might do something else with it.

There again, I probably misunderstood.

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Seems clear to me.

Lloyds have lots of capital that they will need in 2012.

If the state decides they won't need it in 2012, they might do something else with it.

There again, I probably misunderstood.

Oh gotcha, provided there isn't an HPC of course, as then they would have to set aside even more.

Edited by Sir John Steed

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So the Telegraph report is rubbish then? There is so much misinformation about, I'm not sure its worth reading up on anything anymore!

Precisely, take everything with a pinch spade of salt unless they mention the elephant in the room!

The UBS analysts had a look at ALL the bank capital ratios after the "leak" of the Basel 3 criteria in the last 2 days and they seem to have focused on directly related capital issues only hence the mention of APS. They seem to have ignored any other special circumstances that a bank finds itself in. The journalist seems to have "forgotten" that Lloyds accounting needs some extra careful analysis for the next half decade.

The elephant in this case:

The HBoS part of Lloyds effectively required just under half of the total SLS and CGS support available an issue that is ~20 times bigger than buying themselves out of the APS mentioned in the article :lol:,

Need less to say almost none of this "spare" cash will be available to support more mortgages or business lending...

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Seems clear to me.

Lloyds have lots of capital that they will need in 2012.

If the state decides they won't need it in 2012, they might do something else with it.

There again, I probably misunderstood.

It is very clear, only a slight misunderstanding though 2011 not 2012:

Lloyds are building up the cash/capital they will need from 2011 (SLS loans are due to be repaid between April 2011 and January 2012) i.e. they will start needing lots of cash in 7.5 months.

More quotes on Lloyds position (Times Aug 2010):

"Lloyds said that it had repaid £25 billion to “public and central bank sources” over the past six months, it was not specific about which ones. As the SLS was “dirt cheap”, it was likely that the bulk of repayments covered more expensive funding such as the Credit Guarantee Scheme, under which the Government charges an almost commercial rate in return for underwriting banks’ funding"

"analysts believe has about £85 billion in loans outstanding from the scheme [sLS]."

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It is very clear, only a slight misunderstanding though 2011 not 2012:

Lloyds are building up the cash/capital they will need from 2011 (SLS loans are due to be repaid between April 2011 and January 2012) i.e. they will start needing lots of cash in 7.5 months.

(...)

Thanks!

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What does this mean, in plain English?

They are in some sort of asset protection scheme - what exactly does it do?

They have raised more capital ... have they had a share sale? Presumably it was successful?

How, exactly, has QE helped them out.

Wish I understood these damn things.

Where ignorance is bliss, tis folly to be wise.

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So the Telegraph report is rubbish then? There is so much misinformation about, I'm not sure its worth reading up on anything anymore!

"At 31 December 2009, the Group's overall funding support from Governmental and Central Bank sources totalled £157 billion,"

so they have £157 billion of other peoples capital....is that what they are saying...course, it should THEIR capital.

Or is it more smoke and mirrors....

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Is this the same Lloyds ?

How Lloyds and RBS deal with a £150bn headache - 25-9-09

The size and sensitivity of the issue can be illustrated by making two points. Each bank now controls more real estate than the entire listed (commercial) property sector — £150 billion between them. But the underlying assets have shrunk by at least 40% in value since many of the loans were granted.

A senior real estate banker says the “mark to market” value of these loans is under £100 billion.

If Lloyds and RBS sold today and took a £50 billion hit, they would be bankrupt. That isn't going to happen. So, what is?

Edited by Saving For a Space Ship

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Is this the same Lloyds ?

How Lloyds and RBS deal with a £150bn headache - 25-9-09

Would it be possible to find out exactly how many residential, and commercial repossessed properties Lloyds have on their Books?

Could you request this information using the freedom of information act?

It is 43% publicly owned.

Its our company, I own a part of it now, and I want to know.

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Would it be possible to find out exactly how many residential, and commercial repossessed properties Lloyds have on their Books?

Could you request this information using the freedom of information act?

It is 43% publicly owned.

Its our company, I own a part of it now, and I want to know.

You could buy some shares and turn up at the AGM I suppose.

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  • 144 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • Even
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      • up 5%



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