* Bank will return to profitability this year - CEO
* Bank to pay dividends as soon as possible - Chairman
* Shares closing on break-even level for government
* Bank awaiting clarity from regulator on capital position
By Matt Scuffham
EDINBURGH, May 16 Britain's largest retail bank
Lloyds expects to return to profit this year,
increasing the government's chances of selling its stake before
the next general election in 2015.
Prime Minister David Cameron is keen to show that Britain's
part-nationalised banks are recovering from the financial crisis
and a sale of the 39 percent stake in Lloyds, at a profit, would
allow him to claim at least partial success.
Lloyds is further ahead than Royal Bank of Scotland,
81 percent-owned by the government, in the battle to plug
property-related losses and give taxpayers back the tens of
billions of public funds used to bail the banks out in 2008.
"We expect us to return to profitability this year and to
grow our core business, to realise our full potential to deliver
strong, stable and sustainable returns for you, the
shareholders, and to allow UK taxpayers' investment in the group
to be repaid," Chief Executive Antonio Horta-Osorio told
shareholders at the bank's annual general meeting in Edinburgh.
He said the bank would resume paying dividends "as soon as
we are able".
Lloyds' shares were the best-performing stock in Britain's
blue-chip FTSE-100 index last year and they hit a
two-year high of 60.5 pence on Thursday, closing in on the 61
pence level which the government regards as its break-even.
Royal Bank of Scotland's stock was up 3 percent at 316
pence, meaning the government, by contrast, was sitting on a
paper loss of around 17 billion pounds.
Lloyds' executives declined to comment on the likely timing
of a government share sale after the meeting, emphasising that
it was a matter for the government and UK Financial Investments
(UKFI), which manages the government's stake.
Chairman Win Bischoff told shareholders that the government
should be able to start offloading its shares "over time".
Industry sources have told Reuters that a sale would be easier
once the shares traded consistently above 61 pence.
"I'll let them (UKFI) determine the tactics," Finance
Director George Culmer told Reuters. "All we can do is carry on
doing what we're doing in terms of delivering the profitability
and fixing the balance sheet."
Britain pumped 45.5 billion pounds into Royal Bank of
Scotland and 20.5 billion pounds into Lloyds to keep them and
the rest of the banking system afloat in the aftermath of the
collapse of U.S. bank Lehman Brothers in 2008.
Both banks have shed hundreds of billions of pounds of
assets and axed tens of thousands of jobs to cut their
dependence on state aid.
Lloyds made a pretax loss of 570 million pounds in 2012 and
a 3.5 billion pound loss in 2011, hit by the cost of
compensating customers mis-sold loan insurance. But Culmer said
the number of complaints from customers about payment protection
insurance (PPI) was now declining.
"Once regulatory requirements have been clearly defined and
we have prudently met them, and the financial position of the
group and market conditions permit, it is our intention to
recommence dividend payments," Bischoff said.
Britain's financial regulator said in March that UK banks
must raise 25 billion pounds of extra capital by the end of the
year to absorb any future losses on loans. The regulator has not
given specific guidance to banks but analysts expect Lloyds to
be one of those banks facing a shortfall.
Bischoff said the bank was waiting to receive guidance from
the regulator on its capital position but was confident of its
At its own annual meeting this week, Royal Bank of Scotland
said it would need another 18 months to strengthen its capital
position enough to satisfy regulators.
RBS, which has been pushing the government to start selling
its stake, said on Thursday it was cutting a further 1,400 jobs
in the UK over the next two years.
Prime Minister David Cameron told reporters in New York on
Wednesday that the government was "open to ideas" about
offloading its RBS stake, responding to speculation over a
possible share giveaway.