Post date: Aug 01, 2013 12:7:58 PM
Following this morning's news that Lloyds is back in profit, the UK Government are in a good position to sell. IG's Market Analyst Alastair McCaig argues that Barclays is unlikely to affect Lloyds' position despite sucking potential money out of the market.
LONDON, ENGLAND, UK (AUG 1, 2013) (REUTERS) - JOURNALIST ASKING IG MARKET ANALYST ALASTAIR MCCAIG: "I want to start with Lloyds, if we can. These are pretty positive numbers ahead of this offload from the government, right?"
"Yes, it does bode very well for the government and certainly, it was always going to be Lloyds was the first that they were going to try and disentangle themselves from ahead of RBS, a considerably easier project to do. And when you bear in mind, that sort of breakeven prices, GBP0.63. We're well above that, comfortably above that turning profits. I suppose the fact that they've only had to allocate another GBP500 million to the misselling of PPI, when you bear in mind that Barclays had to tag another GBP1.35 billion is in itself encouraging. A lot less fears down the road becomes a considerably more attractive proposition and it does bode well for the government managing to push ahead with this.JOURNALIST: "And there's been a lot of talk on the back of this Barclays rights issue that a lot of the money, the potential money is going to get sucked out of the market for Barclays and that's going to affect Lloyds. What do you make of that?"
"Well I think the positive thing as far as these figures are concerned and the fact that they're even talking about having to stop paying dividends again is the fact that they seem considerably less likely to need to come back to the market. I guess if timelines and possibly ratios get altered as far as the oversight banking committees are concerned and they start tweaking these figures somewhat, then Lloyds might need to have to look at that. But at the moment, it does bode well. You certainly wouldn't want to be second or third in the queue to go to shareholders and seek funds."
JOURNALIST: "Alright. On Shell, I mean it doesn't look great the overall picture. They took the $700 million hit on the back of Nigeria and the Aussie Dollar. That said, how much are they going to benefit from this overall BP hit?"
"Yeah, I guess there's two things you're looking at here. You're looking at the actual figures to themselves for the company and year-on-year, that second quarter is effectively down $1 billion. So it really is pretty disappointing. Yes, it's a hit but it's a sustainable hit and there's quantifiable amounts of money as well. I think the issue with BP, of course, is that they're down to the last $300 million of that compensation fund, the $20 billion they originally allocated and they're obviously going to have to come back to the table with fresh funds there. The compensation claims are open until April 2014 so there's almost the best part of three quarters of a year for people to come in with fresh claims. And the quantity of claims have been rising, not falling. So to a certain extent, Shell will benefit because it's the best of the bad pair. "