ShoreCap expects Lloyds to resume dividends after stress tests, RBS will have to wait

Shore Capital has said that the result of the Bank of England’s (BoE) stress tests on UK banks was “a bit of a non-event” with all of the listed lenders passing as expected.

Seven out of eight of the UK’s largest banks and building societies passed the requirement that they hold a minimum common-equity tier-1 (CET1) capital ratio of 4.5% under the most severe hypothetical economic scenario. The Co-operative Bank was the only one to fail.

However, RBS and Lloyds only managed to scrape through with CET1s of 4.6% and 5.0% respectively.

“Overall, we do not expect the results of the stress test to have a material impact on the share prices of the large UK quoted banks, with macro events (Russia, Oil Price etc) likely to remain the principal driver of market sentiment towards the sector in the near-term, we think,” said analyst Gary Greenwood.

However, he did say that the news should “pave the way for Lloyds to resume dividend payments”. He predicted that the bank could start with a final dividend for 2014 payable next spring, estimating a payment of 1.5p per share.

In contrast, the resumption of dividend payments by part-nationalised peer RBS is “unlikely to occur before 2017”, he said. This would represent a final dividend paid in respect of the 2016 financial year, Greenwood explained.

Shore Capital maintained a 'hold' recommendation on both stocks.

Lloyds’ share price was up 0.9% on Tuesday morning, while RBS dropped 0.5%.