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Lloyds Bank magic effect of share buy backs (4.1% growth in profit per share with no extra work)

I've been watching Lloyds Bank for sometime and have owned shares. I think like many it's seen as a barometer for UK plc and if you think Brexit has a negative effect on the economy pre or post the day itself then you probably think the share price will go down, and vice versa. To date it's been a bit of a mixed bag with some very positive news for the economy, but we don't like a good news story, and as there's certainly worse to come the share price has been in the doldrums. Even the government selling its last shares didn't really perk it up that much. And so, with all the share buy backs and stellar results, I've been waiting for an opportunity to buy, probably post Brexit to potentially shave a few pennies off the buy price. I might buy a few before hand as having just worked the numbers they look even better than when I last looked 2-3 years ago.


So I've dug out the number of shares over time, and have mapped those approximately onto the statutory profit after tax each year to come up with a per share number. Those last two rows with 2019 estimates are based on exactly the same profit as 2018 divided by a) the current number of shares at 31 May 2019, and b) by the potential number of shares left after the 1st March 2019 announced buy back (assuming an average price of 62.85p per share)

I've deliberately not looked at dividends, but in general as I recall, the bank is looking to return at least half of its profits / earnings to shareholders either by dividend, special dividend or share buy back.

Here are a some quotes from the Motley Fool 20th Feb 2019
The bank’s after-tax profits rose by 24% to £4.4bn last year 
The end result was that the bank delivered a return on tangible equity of 11.7%, up from 8.9% in 2017 
Instead of returning more cash to shareholders directly, the bank has decided to return cash through a £1.75bn share buyback. This equates to an extra 2.46p per share. Combined with the 3.21p dividend, it will take total shareholder returns for 2018 to 5.66p, or around 9.4%.

My way of looking at the numbers in the table is that profit after tax per share shown as a yield was 10.48% in 2018. Assuming no growth in total profit after tax for 2019, and assuming the share buy back is completed the profit per share shown as a yield will rise by 4.1% to 10.91% (i.e. from 10.48% to 10.91%)

Now that's not to say that as a shareholder you'll get 10.91p per 100p that you invest, but it is to say that this value will be created for each share (if they make £4.4bn profit again after tax).

This is not investment advice, please do your own research. I don't own shares in Lloyds bank because I'm invested in Eve Sleep, Genel Energy, Yü Group and Metro Bank. However, I may do by the time you read this.
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