What is a share buyback and how might I benefit?
A share buyback (also known as a share repurchase) is a form of returning surplus capital held by a company to shareholders involving the purchase by a company of its own shares.
The effect of a buyback is to reduce the total number of shares in issue. It is expected that shareholders who retain their shares in the Company will benefit from the share buyback programme as they will own an increased proportion of the total shares in the Company and should therefore see an increase in the dividend per share going forward given the reduced number of shares in the Company issue.
What is the current status of your share buyback programme?
On 31 March 2020 we announced that, in order to help us to serve the needs of businesses and households through the extraordinary challenges presented by the COVID-19 pandemic, your Board decided that until the end of 2020 we will undertake no quarterly or interim dividend payments, accrual of dividends, or share buybacks on ordinary shares. Your Board will decide on any dividend policy and amounts at year-end 2020.
In addition, in response to a request from the Prudential Regulatory Authority and to preserve additional capital for use in serving our clients, the board has agreed to cancel payment of the final 2019 dividend in relation to ordinary shares.
The Group has published a letter to shareholders and this is available here:
Important Update to Chairman's Letter: Dividend Withdrawal and AGM Arrangements
At the close of business on Friday 30 August the Group has, through its brokers, bought a total of 1,808,282,308 shares for a total consideration of £1,050 million. The Group announced a share buyback of up to £1.75 billion with its 2018 Full Year Results, which means that at the end of August the buyback programme was c.60 per cent complete. At that date, the total number of Lloyds Banking Group plc shares in issue was 70,128,674,524 ordinary shares of 10p each.
On Monday 9 September, the Group announced that it would suspend the 2019 share buyback programme in light of uncertainty around the final outcome for PPI. Circa £600 million of the 2019 share buyback programme of up to £1.75 billion is expected to be unused at mid-September.
How can I participate in the share buyback programme?
The share buyback programme does not work by buying individual investors’ shares, regardless of whether they are large or small holders. The buyback operates through the bank’s brokers buying shares on the open market, as any investor can do every day. Once the brokers have bought the shares in the market, they transfer them to the Group treasury function, who then cancel those shares.
If an investor wished to sell their shares, the appropriate way to do so would be on the open market, in the normal way.