Lloyds’ 22% rise in Q1 profits raises dividend hopes

Lloyds' strong performance in the first quarter of this year has boosted hopes that it could allowed to restart paying dividends to its investors as soon as next year.

The partly government-owned lender recently announced an impressive 22 per cent rise in underlying profit to £1.8 billion for the January-March quarter of 2014. Costs slipped by 5 per cent to £2.3 billion, thanks to slashing of thousands of jobs and offloading of several international businesses.

The improvement in the lender's financial situation has raised hopes that investors could soon be able to see dividends reinstated. The bank, which is 25 per cent owned by the government, has not been allowed to pay dividends since the financial crisis of 2008, which the government acquired a 41 per cent stake in Lloyds in exchange of bailout package. Later, the government sold some of the stake at a slim profit.

The lender now requires the Bank of England's permission to reinstate dividends. George Culmer, finance director at Lloyds, said they apply to the central bank in the second half of current year and investors would likely be able to see dividends reinstated next year.

Speaking on the topic, Mr. Culmer said, "I would go into those discussions with confidence about our business and about our prospects."

The lender has not been allowed to make a dividend payout by the government since it became a victim of the financial crisis, which forced the government to pump £20 billion into the lender to keep it afloat.

Before the financial crisis of 2008, Lloyds was one of the highest dividend paying banks of Britain. In 2005 and 2006, it paid out more than 50 per cent of its profit in dividends to investors.