Thursday tips round-up: TSB, Aldermore, Henderson Group

Sometimes, having too much money is a bad thing - particularly if you are bank. That is the case at TSB, it has far more capital and a higher cost base than it needs. This shows up in its loan-to-deposit ratio, which now stands at 76%. The lender has gathered that capital up with plans to grow, but has failed to execute. Last year loan volumes at the core part of the bank fell by 6% to £19bn. To remedy the situation last month it launched in the broker market but it will have to hand out a lot of mortgages to meet its ambitious targets.

The risk is that it tries to grow too quickly, with rumours swirling of a possible bid for Aldermore. All the while however, its return on capital will languish. It is targetting a return on capital of 10% by 2019, but even that is mediocre. TSB does even provide shareholders with a dividend yet. Then again, in time it may get there, writes the Financial Times' Lex column.

Fund manager Henderson Group has been executing well enough on its expansion plans. It recently acquired US -based Geneva Capital Management, an investment which is expected to provide an internal rate of return of 20%. That is certainly better than leaving the money in the bank.

The US now accounts for about 15% of the group's funds under management and these are now growing at the same run-rate as last year of £2bn per quarter. With £44m of cash surprlus to regulatory requirements the outfit can fund further US purchases or may even go back to shareholders one day. At the moment the dividend yield is 3.5%. Nonetheless, the shares' price-to-earnings ratio of 16 looks expensive on a relative basis. "Avoid for now," says The Times's Tempus.