Lloyds Banking Group Climbs As Capital Concerns Ease

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LONDON -- A short statement from Lloyds Banking Group  (LSE: LLOY  ) (NYSE: LYG  )  about its capital position helped its shares to rise on Wednesday morning, taking its one-month gain to nearly 35%.

The new Prudential Regulation Authority has been tasked with informing U.K. banks about their individual capital positions. This follows on from the Bank of England's statement earlier this year that the sector needed to raise an additional 25 billion pounds to absorb future losses on loans.

The amount of additional capital Lloyds Banking Group needs to raise hasn't been disclosed, but the bank today said it expected to meet the target via the cash generated from its business and further non-core disposals.

Lloyds recently tried to sell part of its branch network to the Co-op, but the latter pulled out of the process. These branches could now be floated under the TSB moniker. Lloyds is also rumoured to be considering a disposal of Scottish Widows Investment Partnership.

Today's statement is good news for shareholders, as it should mean Lloyds does not need to raise additional money from share issues and other, more exotic, capital instruments known as CoCos.

Lloyds added that it still expects its core Tier 1 ratio (the standard measure of a bank's financial strength) to be 9% by the end of 2013, and 10% by the end of 2014.

Today's news probably makes an early public sale of the government's stake in Lloyds more likely, especially if the share price, up 2% to 63 pence, continues to stay above the break-even level of about 61 pence. Taxpayers originally paid around 74 pence per share when Lloyds was bailed out, but the break-even cost is reduced because of fees and insurance premiums received since then.

That said, while banking shares used to be seen as reliable investments, many people tend to look elsewhere these days for companies that offer seemingly steadier returns. In this free report from The Motley Fool, we suggest five shares to retire on that can help bolster your portfolio.

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