Lloyds investors blinded by dividend prospects

Lloyds Banking Group shares barely reacted to a £28 million fine handed down by the Financial Conduct Authority (FCA) on Wednesday, as investors deemed it was time to move on from the mistakes of the past.

The fine encompassed both Lloyds TSB and Bank of Scotland for "serious failings in their controls over sales incentive schemes" and was the largest fine ever imposed by the FCA or its predecessor, the Financial Services Authority, for retail conduct failings.

Tracey McDermott, the FCA's director of enforcement and financial crime, said: "The findings do not make pleasant reading. Financial incentive schemes are an important indicator of what management values and a key influence on the culture of the organisation, so they must be designed with the customer at the heart.

"The review of incentive schemes that we published last year makes it quite clear that this is something to which we expect all firms to adhere."

But blinkered shareholders were still more concerned with dividend reinstatement and when it might occur.

Their hopes had been bolstered the previous day when Lloyds put its remaining 21% stake in St James's Place on sale, bagging the bank an expected £685 million boost to its tier one capital.

The Prudential Regulation Authority will keep a close eye on Lloyds' capital reserves before allowing the resumption of dividend payments by the board, but analysts are predicting their inclusion in the February 2014 full-year results statement.

Investor view

Over on the Interactive Investor discussion board, 'RAConnell' was dismissive of Lloyds' fine: "Naughty, naughty," he said, "Now let's move on."

But 'Stutes' was more inflamed: "The lessons of PPI appear not to have been learned at Lloyds. Should it continue to be hit with higher and higher conduct fines then questions on the need to split the group will grow.

"Time to recover the £28 million from the board/senior management bonus payments. Why should shareholders be the mugs that pay rather than those found wanting?"