Lloyds Banking Group (LLOY) looks unlikely to pay a special dividend previously forecast by analysts.

Its £1.9bn acquisition of MBNA’s consumer credit card business, announced on 20 December 2016, will effectively use up all its excess capital up to the end of 2017.

Shore Capital had forecast 4p per share dividend for the current financial year – split into 2.55p ordinary payment and 1.45p special dividend.

‘It is likely that the anticipated special dividend may therefore be missed or reduced in order to finance the deal, albeit we would expect further surplus capital to be generated in subsequent years,’ says Shore Capital analyst Gary Greenwood.

Investment bank Jefferies also believes a special dividend is now out of the question and forecasts a ‘mere’ 2.7p ordinary dividend. That implies a 4.2% yield on the 64.34p share price at the time of writing.

The acquisition is subject to regulatory approval and will see Lloyds’ share of the UK credit card market increase from 15% to 26%.

Lloyds claims the acquisition should boost annual revenue by 4% and earnings by 3% and 5% in the first and second full years respectively following completion.

Greenwood notes Lloyds is essentially doubling its exposure to credit cards ahead of a potential Brexit-linked slowdown in the UK which could see an increase in bad debts. (TS)

‹ Previous2016-12-22Next ›