Lloyds could pay out £1bn after BoE eases capital buffer

The Bank of England has eased capital requirements for Lloyds Banking Group, raising the prospect of the bank returning £1bn to shareholders.

The BoE’s Prudential Regulation Authority set Lloyds’ systemic risk buffer for its ringfenced retail bank at 200 basis points or 170 basis points at group level.

Lloyds said this was less than the 210 basis points in its earlier capital guidance and it expects strong cash generation to keep building capital. Bank capital is shareholders’ money that is used to absorb losses from bad debts.

“The group has a progressive and sustainable ordinary dividend policy and the Board will continue to give consideration to the distribution of surplus capital at the end of the year,” Lloyds said.

Analysts at Jefferies said the change in capital requirements was worth £1bn that could be paid out to shareholders at the end of 2019 or held aside for future regulatory changes.

“We are firmly in the former camp given the group's strong free-capital generation,” the analysts said.

Lloyds shares rose 1.6% to 63.6p at 09:32 BST.