(LLOY.L) Lloyds Banking Group PLC Buy/Sell

By Jane Merriman

LONDON, Nov 20 (Reuters) - Investment bankers are already pitching to clients a new form of hybrid bond that financial regulators see as a potential saviour of troubled banks, but it is uncertain if they will work or if investors will buy them.
The bonds, which convert to equity if a bank's capital runs low, have been created for Lloyds as part of a 21 billion pound ($34.63 billion) capital raising to free the UK bank from a government insurance scheme for bad loans.
The new Lloyds' hybrids -- known as enhanced capital notes -- are a special case because the bank is offering them to investors in exchange for bonds where coupon payments will be deferred for two years.
These investors are expected to bite because they will get a higher coupon rather than no coupon.
One banker likened it to a forced exchange. As such, the real test for contingent convertibles (CoCos) will come if and when other banks decide to issue them.
"CoCos will have a role if they are priced efficiently by the market and this is where we have to still see more new deals coming to the market which are not part of an exchange," said Thibaut Adam, head of capital markets structuring at BNP Paribas.
"We need to see new issues from stronger names and see how they price." He said there were proposals in the United States to have systemically important banks issue these instruments.
Hybrid structurers said that the price needs to be attractive relative to the cost of raising true equity capital.
A number of financial regulators have given their support to CoCos, including the Bank of England.
"All the regulators are looking at them," said Thomas Huertas, FSA banking sector director. "It's a rapidly evolving area where a consensus is developing," he said, speaking on the sidelines of a Citi European Credit Conference.
"We'll look to see how the Lloyds' ECNs (hybrids) go." The results of Lloyds' bond exchange are due on Monday.
Huertas said CoCos would be discussed by regulators at the Basel Committee on Banking Supervision in December.
CoCos' selling point with regulators is that they convert into equity just when a bank needs more equity. And equity is the kind of bank capital regulators like because it can absorb losses while the bank is still a going concern.
In Lloyds' case, the bonds would convert if the UK bank's capital fell to 5 percent.
"Technically, the bank gets more capital in because the CoCos convert," said Gary Jenkins, head of fixed income research at Evolution Securities.
"It's got to be a positive and it's better than what we had before, but it doesn't necessarily mean it saves it."
Jenkins said most troubled banks fail because of liquidity problems, which would not be solved, even by a capital injection from CoCos.

Bond investors have so far given Cocos a cool reception.
Bank of America Merrill Lynch, for example, had to row back on a decision to include them in its bond indexes after investors objected.
Investors say CoCos do not really have the characteristics of traditional bonds, which should offer stable cashflows and relatively low-risks.
"There will be people who opportunistically use them," said Lise Coleman, head of global credit fixed income at JP Morgan Asset Management. "It's a way of getting a higher beta play into your portfolio. But it won't be the traditional buyer base... it will be a different universe."
The type of investors attracted to CoCos could pose questions for regulators.
"Would it be an issue for the FSA who provides this (capital) buffer?," said Oliver Judd, financials analyst at Aviva Investors. "Is it a long-term stable investor base or a more short-term volatile investor base?"
CoCos could evolve to reassure mainstream investors.
One additional feature under consideration is that the bonds convert into a variable number of shares, bankers said. Another issue is whether regulators would have some discretion over when to activate the conversion, they said.
With regulatory momentum behind them, CoCos could gain some credibility, but bankers said they doubted if a brand new CoCo bond could come to market before Christmas.
"But would someone start to add a sort of contingent spin on Tier 1 issuance in 2010? Well, we are certainly pitching for that and people are listening," said Adam.

($1=.6064 Pound)

(Additional reporting by Claire Milhench; editing by Simon Jessop) Keywords: BANKS COCOS (jane.merriman@thomsonreuters.com; +44 207 542 3121; Reuters Messaging:jane.merriman.reuters.com@reuters.net)

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Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.

RNS Number : 8608C Lloyds Banking Group PLC 20 November 2009

FORM 8.3

DEALINGS BY PERSONS WITH INTERESTS IN SECURITIES REPRESENTING 1% OR MORE

(Rule 8.3 of the Takeover Code)

1. KEY INFORMATION
Name of person dealing (Note Lloyds Banking Group plc
1) and its subsidiaries
Company dealt in Care UK plc
Class of relevant security to Ordinary 10p

which the dealings being disclosed relate (Note 2)
Date of dealing 19 November 2009
2. INTERESTS, SHORT POSITIONS AND RIGHTS TO SUBSCRIBE

(a) Interests and short positions (following dealing) in the class of relevant security dealt in (Note 3)

Long Short
Number (%) Number (%)
(1) Relevant securities 6,274,981 (10.240%)

(2) Derivatives (other than options) (3) Options and agreements to purchase/sell
Total 6,274,981 (10.240%)

(b) Interests and short positions in relevant securities of the company, other than the class dealt in (Note 3)

Class of relevant security: Long Short
Number (%) Number (%)

(1) Relevant securities (2) Derivatives (other than options) (3) Options and agreements to purchase/sell Total

(c) Rights to subscribe (Note 3)

Class of relevant security: Details

3. DEALINGS (Note 4)
(a) Purchases and sales

Purchase/sale Number of securities Price per unit (Note 5)
Sale 600 £3.540

(b) Derivatives transactions (other than options)

Product name, e.g. CFD Long/short (Note 6) Number of securities Price per unit (Note
(Note 7) 5)

(c) Options transactions in respect of existing securities

(i) Writing, selling, purchasing or varying

Product name,e.g. call option Writing, selling, Number of securities Exercise price Type, e.g. American, Expiry date Option money
purchasing, varying to which the option European etc. paid/received per
etc. relates (Note 7) unit (Note 5)
(ii) Exercising

Product name, e.g. call option Number of securities Exercise price per unit (Note 5)

(d) Other dealings (including new securities) (Note 4)

Nature of transaction (Note 8) Details Price per unit (if applicable) (Note

4. OTHER INFORMATION

Agreements, arrangements or understandings relating to options or derivatives

Full details of any agreement, arrangement or understanding between the person disclosing and any other person relating to the voting rights of any relevant securities under any option referred to on this form or relating to the voting rights or future acquisition or disposal of any relevant securities to which any derivative referred to on this form is referenced. If none, this should be stated.

RNS Number : 8607C Lloyds Banking Group PLC 20 November 2009

FORM 8.3

DEALINGS BY PERSONS WITH INTERESTS IN SECURITIES REPRESENTING 1% OR MORE

(Rule 8.3 of the Takeover Code)

1. KEY INFORMATION
Name of person dealing (Note Lloyds Banking Group plc
1) and its subsidiaries

Company dealt in Neuropharm Group plc

Class of relevant security to Ordinary 10p

which the dealings being disclosed relate (Note 2)
Date of dealing 19 November 2009
2. INTERESTS, SHORT POSITIONS AND RIGHTS TO SUBSCRIBE

(a) Interests and short positions (following dealing) in the class of relevant security dealt in (Note 3)

Long Short
Number (%) Number (%)
(1) Relevant securities 3,033,071 (9.618%)

(2) Derivatives (other than options) (3) Options and agreements to purchase/sell
Total 3,033,071 (9.618%)

(b) Interests and short positions in relevant securities of the company, other than the class dealt in (Note 3)

Class of relevant security: Long Short
Number (%) Number (%)

(1) Relevant securities (2) Derivatives (other than options) (3) Options and agreements to purchase/sell Total

(c) Rights to subscribe (Note 3)

Class of relevant security: Details

3. DEALINGS (Note 4)
(a) Purchases and sales

Purchase/sale Number of securities Price per unit (Note 5)
Sale 400 £0.150

(b) Derivatives transactions (other than options)

Product name, e.g. CFD Long/short (Note 6) Number of securities Price per unit (Note
(Note 7) 5)

(c) Options transactions in respect of existing securities

(i) Writing, selling, purchasing or varying

Product name,e.g. call option Writing, selling, Number of securities Exercise price Type, e.g. American, Expiry date Option money
purchasing, varying to which the option European etc. paid/received per
etc. relates (Note 7) unit (Note 5)
(ii) Exercising

Product name, e.g. call option Number of securities Exercise price per unit (Note 5)

(d) Other dealings (including new securities) (Note 4)

Nature of transaction (Note 8) Details Price per unit (if applicable) (Note

4. OTHER INFORMATION

Agreements, arrangements or understandings relating to options or derivatives

Full details of any agreement, arrangement or understanding between the person disclosing and any other person relating to the voting rights of any relevant securities under any option referred to on this form or relating to the voting rights or future acquisition or disposal of any relevant securities to which any derivative referred to on this form is referenced. If none, this should be stated.

By Mark Potter

LONDON, Nov 20 (Reuters) - Tesco, Britain's biggest retailer, took a further step on its journey to become a force in banking by signing up U.S. group Fiserv to provide the technology platform for its financial services business.
The supermarket group said on Friday, the second day of presentations to investors about its ambition to grow in retail services, that Fiserv would help it to make the leap from a collection of financial products to a full-service bank.
Tesco bought Royal Bank of Scotland out of a financial joint venture in July 2008 and unveiled plans to double profits from its retail services businesses, such as banking, to 1 billion pounds ($1.7 billion) over several years.
It has since gone on a staff recruitment drive, started testing bank branches within stores and signed an insurance deal with Fortis. It is also benefiting from discontent with traditional banks following the financial market crisis.
In presentation slides on its Web site, Tesco said it has 6 million customer accounts, with its credit card business growing at an annual rate of about 10 percent, personal loans growing at 19 percent and instant access savings accounts at 28 percent.
Transactions at its travel money business are up over 100 percent, it added.
The group said its banking business would initially target its most loyal shoppers -- the 15 million members of its Clubcard loyalty scheme.
Just 10 percent of Clubcard holders have a Tesco credit card, currently its biggest financial business, while only 4.2 percent have Tesco car insurance and 2.2 percent a Tesco savings product, it said.
Some analysts have speculated whether it might be interested in buying assets from bailed-out banks like Lloyds, RBS and Northern Rock.
However, Tesco Bank chief executive Benny Higgins said on Tuesday he was focusing on organic growth, with plans to introduce a Tesco current account and possibly also mortgages over the next couple of years.
Presentation slides from banking commercial director David McCreadie said it would take time to develop the right proposition on current accounts.
Expansion into mortgages would also require the development of a broader source of funding for the bank, he noted.
Tesco said on Thursday it was also aiming to build a telecoms business generating 2 billion pounds a year of sales over the medium term.
The world's third-biggest retailer, which has around 30 percent of Britain's grocery market, is looking to retail services along with international expansion as a way of generating new, and often more profitable, revenue streams.
At 1240 GMT, its shares were down 1.1 percent at 420.5 pence, in line with the DJ Stoxx European retail index.
Fiserv provides information management and electronic commerce systems for the financial services industry.

($1=.6002 Pound)

(Editing by Jon Loades-Carter) Keywords: TESCO/ (mark.r.potter@thomsonreuters.com; +44 20 7542-2943; Reuters Messaging: mark.potter.reuters.com@reuters.net)

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Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.