Markets shrug off worries about Greece despite election victory by anti-austerity party SyrizaBritain’s state owned banks could be paying dividends within 18 months as they continue their recovery from the financial crisis.Lloyds Banking Group added 0.47p to 76p and Royal Bank of Scotland rose 3p to 383.1p as Steve Davies, co-manager of the Jupiter UK Growth Fund said the banks were becoming more profitable, and were increasingly in a position to return a share of these profits to shareholders. He said:The first test, in our view, will come when Lloyds announces its full-year results on 27 February. If the bank is allowed to pay a token dividend for 2014, we think it would send a very strong signal to the market that UK banks have turned a corner.We believe Lloyds is capable of generating as much as 10p a share of profit of which at least 50% could be paid out as a dividend, if not more given the bank’s moderate growth outlook. In such a scenario, it would imply an annual dividend of at least 5p a share although we think it may be closer to 7p to 8p; that would support, in our view, a share price well above 100p compared to a current price in the region of 75p.Many had expected the Greek election to unleash chaos on markets, but with the ECB having launched QE and the impact of the new government in Athens being so difficult to quantify, it looks as if the default setting in Europe remains ‘buy on the dips.’Hurdles remain to Aer Lingus accepting IAG’s revised €2.55 a share bid but on balance we think a deal will get done. The deal would be positive for IAG, adding further growth avenues to the already exciting outlook, and for Ryanair shareholders, who could rightly expect a cash windfall.We have downgraded our rating on IGas from buy to neutral following Lancashire County Council’s decision to deny permission for Cuadrilla Resources’ two proposed shale gas wells and the Environmental Audit Committee’s recommendation that there should be a moratorium on shale gas fracking in the UK. Despite the longer-term need for new natural gas supplies in the UK, these developments suggest that IGas shares will struggle to perform near term so we have cut our target price to 25p (from 164p). Continue reading...
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