Investors hoping for Lloyds Banking (LLOY) to resume dividends in the near future shouldn't get their hopes up. Today's first-quarter results are flattered by large asset sales. The underlying business is only making slow progress, albeit there is welcome news on falling costs.


The business is targeting core tier 1 ratio – the ratio of a bank's core equity capital to its risk-weighted assets – above 10% by the end of 2014, which could be the point where dividends become a serious proposition.


The bank has reported a £2 billion pre-tax profit, up from £280 million during the same period in 2012, sending the shares up 3.9% to 55.59p.


The boost in its results was due to a fall in bad debts as well as earning £776 million from the sale of government bonds and selling £394 million of its stake in wealth manager St James’s Place (STJ). However, management will have to find new sources of income aside from restructuring and selling government bonds if it wants to show investors that its growth will continue to rise.


The update comes a week after the bank failed to sell more than 600 branches to the Co-op for £800 million under the terms of its bail-out agreement. It has branded the branches as TSB and intends to float them on the London market.


Until then, chief executive officer Antonio Horta-Osorio is pushing forward with his strategy to focus Lloyds as a UK retail and commercial bank, which included the sale yesterday of its Spanish retail business for £72 million of shares in Banco Sabadell, the acquirer, an 1.8% stake in the bank.


Lloyds’ progress towards privatisation has been faster than that of Royal Bank of Scotland (RBS), which releases its trading statement for the first quarter on Friday (3 May).

Issue Date: 30 Apr 2013