Lloyds Banking capital and dividend strength 'key attraction', says RBC

Lloyds Banking Group's capital and dividend strength is a “key attraction” for investors, said broker RBC Capital Markets after the bank brightened the sector with full year pre-tax profits of £4bn.

Lloyds declared a 1.7p a share final dividend with a 0.5p a share payout special equivalent to an annual yield for the year at 4.6%, in line with consensus, RBC said in a note.

The bank's capital ratio was13.8%, higher than the 13% target anticipating the 80 basis points (bps) capital cost of buying credit card outfit MBNA, and higher than RBC's 13.4%.

Impairments fell 16% year-on-year, 4% better than consensus with an asset quality review (AQR) at 15bps.

“Lloyds guides to 25bps AQR ratio in 2017 which is much better than consensus at 33bps- the 8bps difference is worth around 5% on consensus profits before tax,” RBC said.