This is getting serious — so serious that I’ve done something I may have cause to regret terribly a year or two hence. I have sold my shares in Lloyds TSB. I did so with a heavy heart, and an even heavier loss, since they were bought when the shares were yielding 7 per cent, a rate comfortably in excess of the interest on the bank’s most generous deposit account at the time. They are still yielding 7 per cent, in a manner of speaking, but the shares are sad, shrivelled things, and the extra income I’ve had is a tiny fraction of the capital I’ve lost.
Lloyds was the bank that did Dull. It maintained the dividend when all around were urging it to cut (the finance director cut himself loose instead when the board, under chief executive Peter Ellwood, overruled his recommendation) and for five years the new board under Sir Victor Blank continued to pay the Peter Ellwood Memorial Dividend, even though it absorbed most of the profits.
When things started to go bad last year, we had reason to be grateful, and not just for the cheques. Having paid out so much to shareholders, Lloyds had nothing left to waste on adventures in derivatives, or expensive acquisitions. We were puzzled when the board turned down the chance to take over Northern Rock for a song, but when the truth about the Rock’s balance sheet emerged, and the financial panic got worse, we were grateful for that, too.
We watched while first RBS and then HBOS had to eat humble pie, admitting that their balance sheets were shot and scrapping this year’s dividends even before last year’s final had been paid. How smug we were when, on 30 July, Sir Victor raised the half-time payout by 2 per cent, explaining that ‘this increase demonstrates the strength of the group’s business model’.
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