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Lloyds Banking Group poised to buy back about £1bn of its shares from next month as it begins a sweeping new strategy under Charlie Nunn










Lloyds Banking Group is poised to buy back about £1billion of its shares from next month as it begins a sweeping new strategy under replacement boss Charlie Nunn. 

The announcement will come alongside the bank’s full-year results, the first to be revealed under Nunn who took over from Antonio Horta-Osorio last summer. 

Repurchase programmes buy back shares from the stock market to boost the value of the remaining shares, providing a lift to Lloyds investors. 

Moving in the right direction: Repurchase programmes buy back shares from the stock market to boost the value of the remaining shares, providing a lift to Lloyds investors

Moving in the right direction: Repurchase programmes buy back shares from the stock market to boost the value of the remaining shares, providing a lift to Lloyds investors

The bank revealed in October that it had more than £4billion in surplus capital

In a presentation seen by The Mail on Sunday, director of investor relations Edward Sands said: ‘We have a very strong capital position that is likely to lead the board into a conversation around surplus capital distributions over and above the ordinary dividend. 

The market is expecting a buyback of circa £1billion – so a reasonably meaningful buyback programme.’ 

Investors said Lloyds set aside a large amount of cash for potential bad debts which have not materialised and so can be used elsewhere – noting that this should enable significant dividend payments an share buybacks. 

Analysts are forecasting that the dividend will amount to 1.99p a share – totalling £1.41billion – for 2021. This is expected to rise to £1.59 billion for 2022 and £1.79billion for 2023. 

Rivals Barclays, HSBC and Standard Chartered all used their extra capital to buy back shares last year while NatWest bought back stock from the Government, reducing the State’s shareholding to just over 50 per cent. 

Banks are sitting on big capital cushions after being forced by the Bank of England to halt dividend payments in 2020 during the pandemic in order to shore up their balance sheets. 

Russ Mould, analyst at AJ Bell, said: ‘The key here is how much excess capital does the firm have relative to regulatory requirements. 

‘That excess could in theory be used for buybacks – as the cash will be earning so little it will start to depress returns otherwise.’ 

Nunn is also expected to unveil his highly anticipated plans for the bank which are thought to include the expansion of wealth management, insurance, corporate banking and its role as a landlord. 

He is also set to warn of rising operating costs as inflation rises.

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Britain’s  biggest internet companies have been targeted by stock market traders in a £1billion bet their share price will fall. 

Fashion giant Asos is the latest to find itself in the firing line of short-sellers – who use financial contracts to borrow stock in order to gain if the share price falls – with nearly 8 per cent of its stock now on loan, according to research. 

The sudden increase in the number of short positions at Asos, which rose by a third in recent weeks, emerges amid a rout in technology stocks. 

Other stocks that have been targeted include Ocado – the largest short position by value at £703million, or 6 per cent of its stock – as well as Boohoo, AO World and Made.com. 

Squeezed: Asos faces supply issues and more returns with parties cancelled

Squeezed: Asos faces supply issues and more returns with parties cancelled

Deliveroo has also been dumped by investors. Last week its shares dipped below £1.95 – half its £3.90 flotation price of just nine months ago – though the size of short positions in Deliveroo is low at less than 0.2 per cent. 

Tech firms around the world, including Britain’s online shopping success stories, found favour during the pandemic. 

But Wall Street’s tech-heavy Nasdaq share index took a hammering last week in an investor rout that rocked markets

The big sell-off even hit stock-market darlings Apple, Amazon and Tesla. Energy companies and banks have gained: businesses that are regarded as less sensitive to interest rate rises, as the Federal Reserve dials down its emergency economic help in the US. 

It follows revelations in The Mail on Sunday last weekend that hedge funds and other traders had built up record short positions in The Hut Group, the owner of the LookFantastic and MyProtein brands. 

THG’s shares subsequently plummeted 10 per cent on Tuesday, the first trading day after the weekend, and are struggling to bounce back. 

In late September the number of Asos shares on loan was less than 1 per cent. The share price has dwindled 34 per cent since then. 

Though Asos shares have not fallen significantly in recent days, the data suggests an increasing number of traders believe they may fall further. 

Short-selling is controversial because critics say it can be used to engineer a quick drop in a share price. 

But short traders and research companies are increasingly seen as an indicator that there are fundamental issues with management strategy, a company’s prospects – or that a company is overvalued for other reasons. 

In the UK, the Financial Conduct Authority publishes individual short positions the first time they have reached more than 0.5 per cent of company stock at the end of a trading day. However, because only such big positions are declared, it is hard to pinpoint the exact volume of short positions, other than looking at figures for loaned stock. 

So while FCA data currently records that just one hedge fund, Marshall Wace, holds 1.5 per cent of Asos shares, the financial information provider IHS says its figure of almost 8 per cent from lending data provides a ‘close proxy’ for total short-selling volumes at the end of each trading day. 

Sources said traders believe Asos, a favourite among Britain’s fashion-conscious 20 and 30-somethings, faces a squeeze despite assurances from the board in November that it could double profit margins long-term as sales rise. 

It is without a chief executive after Nick Beighton left with immediate effect in October, adding to the uncertainty. 

Its rival Boohoo’s shares have fallen too – by 58 per cent since September. Last month, Boohoo halved sales growth forecasts for the year to February 28, 2022, and slashed profit guidance. 

The cost of materials and shipping has soared, more items have been returned than before the pandemic with parties cancelled due to Covid scares – especially last month – and competition from Chinese internet shop Shein grows. By contrast the fortunes of physical shops have rebounded. 

Tesco shares are at their highest since before an accounting scandal in 2014, while Marks & Spencer’s share price has soared to levels not seen for almost three years.

At just 0.23 per cent, the number of M&S shares on loan also appears to suggest short-selling traders believe its turnaround is bearing fruit. 

This week will see market updates from Marks & Spencer, Sainsbury’s, Tesco, JD Sports and Asos, among others. WH Smith, AO World, SuperGroup and Hotel Chocolat will report the following week. 

Next on Thursday said trading had been better than expected and predicted it would reap record profits this year. 

It said full-price sales were 20 per cent higher in the festive period than the comparative weeks in 2019, before the pandemic began.

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