UPDATE 2-Lloyds Bank no plans yet to leave an independent Scotland

Thu May 15, 2014 12:26pm EDT

Related Topics

* Bank has said independence would impact costs, taxes

* Lloyds could move parts of business back to London

* Impending vote creating uncertainty - chairman

* Bank's pay plan backed by shareholders (Adds details of pay vote, chairman comments)

By Matt Scuffham

EDINBURGH, May 15 (Reuters) - Lloyds Banking Group is not currently preparing to leave Scotland if there is a vote in favour of independence from the rest of Britain, the bank's new chairman told shareholders at its annual meeting on Thursday.

Chairman Norman Blackwell said there were too many uncertainties for the bank to have made any decision.

"We are not at this point planning any moves because we don't know what the result will be," he said. "If they were to vote for independence we will seek to work with relevant authorities to ensure we have a way forward to achieve our core purposes of serving customers across the UK," he told the meeting, which was dominated by the independence issue.

Scotland holds a referendum on Sept. 18 which could end the country's 307-year-old union with England. Scotland's First Minister Alex Salmond has said it would officially become independent in March 2016 in the event of a 'yes' vote, giving Lloyds 18 months to assess its options.

Lloyds, which owns Bank of Scotland and has its registered offices in Edinburgh, has been stepping up contingency planning in case Scots do vote for independence, according to banking industry sources.

Lloyds has warned that a vote for independence will impact its cost of funding, taxes and compliance costs.

Blackwell said the bank would work with the relevant authorities in the 12-18 month period following a 'yes' vote to decide the best course of action to take.

Edinburgh-based insurance group Standard Life has already begun detailed preparations for a possible move of some operations out of Scotland to minimise upheaval if Scots vote for independence.

Standard Life, based in Scotland for nearly 200 years, said this week it would not hesitate to move parts of its operations to England or register its funds there to protect its market position.

Banking industry sources have told Reuters that one option for Lloyds could be to move the headquarters of its Lloyds and Halifax businesses to London and operate Bank of Scotland from Edinburgh as a foreign division of the business.

Lloyds and its rival Royal Bank of Scotland have both been determined to stay out of the debate over independence.

"It is clearly a matter for the Scottish electorate, the bank does not have a corporate view set out but there are clearly uncertainties created for everyone in advance of the referendum," Blackwell told the meeting, where some 270 shareholders attended.

Prime Minister David Cameron is in Scotland for a two-day visit to campaign against independence as the race tightens ahead of the September vote. A TNS poll this week found that, among those certain to vote, 35 percent would opt for independence while 44 percent were opposed to it, narrowing the gap between the two sides to nine points, its lowest since the TNS poll began last September when the gap was 22 points.

Lloyds' plans to pay key staff bonuses worth up to double their fixed pay were overwhelmingly supported by investors, including UK Financial Investments (UKFI), which manages the government's stake. 98.8 percent backed the plan.

Chief Executive Antonio Horta-Osorio reiterated the bank's intention to ask Britain's financial regulator to allow it to start paying dividends again in the second half for the first time since it was rescued through a 20.5 billion pound government bailout during the 2008/9 financial crisis which left the government holding a 40 percent stake.

UKFI has begun selling the government's stake in the bank, which returned to profit last year. The government is keen to sell its remaining 25 percent stake before the election in 2015.

But uncertainty surrounding the Scottish independence vote, could scupper those plans, banking industry sources said. UKFI is unlikely to be able to sell shares in the weeks leading up to the vote because of uncertainty over the outcome. This would effectively rule out a sale for most of September, which had been seen as a window of opportunity after the summer holidays and before a close period ahead of the bank's third quarter results. (Reporting by Matt Scuffham; Editing by Steve Slater and Jane Merriman)

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