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LLOY - Share buyback 2019

lse:lloy

#1

LLOY has now announced the formal start of the buyback, [click to view RNS]

We can now monitor how their purchases are proceeding. Yesterday’s TVR RNS gives us the staring point for the calculations, i.e. total number of shares in issue = 71,349,949,398


#2

Well the first day of buying back shares has finished, and 11.6m have been bought at a cost of £7.34m. Only another £1,743m to go!

The (very long) full list of trades, made on four different trading venues is also available, [click to see].


#3

Paid strong money for the shares, ,Market loves these buy backs and Lloyds don’t mind standing tall and paying a premium.


#4

Are they just buying back the bonus i.e, will the cancellation actually make a difference to the EPS in future l doubt it.


#5

So the eating machine has begun :slight_smile:


#6

It does depend on the actual price paid, but I estimate that the buyback should reduce the number of shares in issue by between 2.5% and 3%, which will obviously increase the dps and eps by this amount, without an additional increase in the underlying earnings or dividend.

Hopefully the Directors wil not increase the number of “bonus” shares so about 0.85m of the 2.85m to be bought will negate the bonus issues, and the remaining 2m will act to increase the eps/dps.


#7

All we know if there’s a big buyer on the market it cannot do us any harm :slight_smile:

Like today a falling ask is a bonus for long term holder’s


#8

Hi All,

Buybacks, don’t you just love them. Spend £7.34M on shares today and the price falls by just over 1% !. Looking st the LSE daily volumes it would seem that £6-12M was sort of typical of the value of LLOY shares traded in February. So you would think that spending £7.34M in a day would guarantee a positive move in the share price, but clearly not.

I have observed numerous buybacks in the past and the only one that was noteworthy for raising the share price was the one that started with the HSBA share price just over 400 and took it up to the mid to high 690s. I have monitored numerous other buybacks both with HSBA and other companies and sadly quite a lot of the time they don’t do much to raise the SP I’m afraid. In fact it is not uncommon for the SP to actually fall.

Found this article while making this post:-

Clearly they didn’t work for IBM, maybe LLOY will have better luck ?

ATB

Pref


#9

Agreed, been following Lloyds sp movement long enough to know price is held artificially high whilst the buyback is in progress, and when buying stops…it drops.


#10

Held artificially high at 63p

Joke of the Day

Pull the other one its got bells on

Hahahahahaha

Just wait for Brexit and PPI to be completed 83p will be cheap here IMHO


#11


This chart shows the relative performance of the major Banks and the FTSE100 rebased to the starting date of the LLOY 2018 buyback. The data for the other banks covers the buyback period, and the LLOY/FTSE data have been extended to the current day.

The LLOY movement during the buyback appears similar to other Banks, and I do not see any particular sign of an effect of the buyback, and the LLOY sp was certainly not held at an elevated level compared to the other Banks.

The LLOY SP mirrored the FTSE (approximately) after the buyback ended, and only started a relative out-performance since Christmas. LLOY has only recently returned to the level at the end of the buyback.

Looking at the volumes traded for the buyback and comparing them to the LSE volume figures is incorrect, since many of the trades are made on other platforms. Only ~£4.95m of the volume traded yesterday was done on the LSE, which is less than the estimated typical value for February.

There are many global and local effects that influence the LLOY SP, with these effects being significantly greater than those produced by the buyback. The way the LLOY buyback has been and is managed is designed to have as little direct impact on the sp as possible, so I do not expect to see any direct correlation between the sp and the trades made.


#12

A good analysis Bowman. The LLOY sp has been held back by PPI compensation which is coming to an end this year. One might expect a bit of a rebound after this happens but perhaps the bigger influence currently is the political news on Brexit. The rise since new year corresponds neatly with growing optimism that a hard “No deal” Brexit will be avoided. I think the market is right to be optimistic. Underlying all this, LBG is performing pretty decently on all metrics and supports a good yield. With sp growth this could be a very decent punt. I think Regardless will see his 80p sooner rather than later.

On the Buy Back itself, this only amounts to a couple of percent (?) from memory but, while it is an unpopular strategy to income investors, it is prudent housekeeping and the effect should be neutral over time.

Cheers,

Frog in a tree


#13

Frog,

I believe that the end of PPI has now been factored in to the SP. The only thing that might change is if the assumptions made for the remaining provisions are found to be too pessimistic, which could result in a write-back of the provisions (although this is only a small amount).

The December PPI payment figure (£258.9m) shows a significant reduction in the monthly payouts. My data indicate that potentially the current LLOY PPI allocated costs, which includes the unused provisions, should more than cover the total expected LLOY payout. Currently it appears that LLOY payouts account for 53% of the total made to date.

I have tried to keep my posts, and certainly my threads, Brexit free, although I do acknowledge that sentiment around this issue does have a certain effect on the LLOY sp, so I will refrain from giving you my view on the Brexit related sentiments you included in your post.

The buyback on its own would make a 4% change in the eps/dps, but this effect is reduced by the number of new shares being issued to about 3%. These figures are based on the whole buyback being made at the current sp. A lower average price paid would increase the effect, and vice-versa.


#14

Regarding Brexit, I can understand that you don’t want to engage in a debate on the pros and cons but my observation is that the LLOY sp tends to increase when there is news suggesting that a no deal Brexit is unlikely. News, “events, dear boy, events!”

Frog in a tree


#15

It has nothing to do with engaging in a debate on Brexit, this thread is to discuss the buyback. The only link between Brexit and the buyback is the sp. Should Brexit effects cause the sp to rise then this will reduce the effectiveness of the buyback, and vice-versa; there is really nothing more to say. The buyback on its own is unlikely to affect the sp noticeably since there are other more dominant factors, of which Brexit is one among many.

There are sufficient other places to make ones Brexit views clear, and to be trolled, harangued, heckled, and insulted, should one wish to try to engage in the on-going Brexit related discussions.


#16

You are too touchy Bowman. I had commented that your analysis was good but also contributed on the Brexit effect on the share price as others had commented on this and on the effect of buyback on the sp.

Over and out

Frog in a tree


#17

Well said Bowman, the puppet master bully wants every thread talking about Brexit.


#18

It’s like having a switch in one’s brain that is stuck on one polarity.

On Lloyds in general, my personal view is that the biggest risk to Lloyds in the next two years is the fall in the asset values, and that is potentially weighted toward the property market.
Lloyds has a pretty good spread of mortgage loans with a good % having low loan to value ratios, however, that might not count for much if the whole thing gets dragged down - the sentiment may be enough.

If you ever use Zoopla it has a very useful track of the listing dates and all the changes in the prices. Some regions are being hit so badly that the expected sell prices are now coming back to what was on offer even up to 10 years ago.

I’m not a big fan of the tier 1 equity ratios which seem to be designed to prove that the banks are safe, which they are not. With equity at such a very low level compared to the overall leverage, it doesn’t take a very big asset decline to wipe the whole thing out.

I’m holding, but very tentatively.

Here is an example of a property for sale in Brighton :-

12th Nov 2018
£400,000
Price reduced by £150,000
31st Jul 2018
£550,000
Price reduced by £40,000
30th Jun 2018
£590,000
Price reduced by £50,000
9th May 2018
£640,000
Price reduced by £50,000
1st May 2018
£690,000

Games


#19

just by way of balance, this one is in London(Richmond), not Brighton

https://www.zoopla.co.uk/for-sale/details/42182708?search_identifier=7c145a3e4850f4e9bd19b0c2ab9019fc

20th Feb 2019
£250,000
Price reduced by £45,000
9th Oct 2018
£295,000
Price reduced by £30,000
29th Jan 2018
£325,000
Price reduced by £25,000
12th Apr 2017
£350,000
Price reduced by £49,950
6th Dec 2016
£399,950
Price reduced by £25,050
9th Nov 2016
£425,000

OK these are two small samples, but you can try any region. This suggests to me that the economy has been entirely false for some years now - and this is not just a UK phenomenum.
The conclusion, however dangerous, is that the asset values on the banks books are completely arbitrary and equity could be undermined at any economic shock.

Games


#20

Hi @Gamesinvestor1, Wow those are big drops in the asking prices arent they ?. I took a look on zoopla in my area and couldnt immediately see the same effect, but then we probably dont have the elevated prices levels of Brighton or London. But lets face it people are just BOUND to be being more cautious right now and buyers I am sure are taking full advantage, prices being SO elevated.

I have been wondering for some time about commercial property prices and the effect on REIT valuations. With so many high streets getting filled with vacant shops this cant be good. I like this sector but sold at the end of last year as I thought it might take a big hit as we got closer to the brexit deadlne, and in truth some REITS have been damaged, see my link to a post on the NRR board:-

Clearly these might also impact on bank performance were some REITs to get into trouble.

Barring some major economic / financial breakdown, I personally think that the outlook for LLOY is pretty good. I am not holding LLOY though other than through an ETF (I have some HSBA).

Seems to be moving steadily upwards right now and the buyback ought to provide a tailwind, but just not guaranteed that’s all (and lets face it what is…?).

GLA holders

Pref