Banks press Britain to lift ban on dividends

LONDON, Oct 15 (Reuters) – Some of Britain's banks are urging the government to lift a ban on dividend payments imposed as part of its 37 billion pound ($65 billion) bail-out of the crisis-hit sector, newspapers reported on Wednesday.

Royal Bank of Scotland, HBOS and Lloyds TSB — the three lenders participating in the state rescue — have all seen their share prices drop as a result of the dividend condition, The Financial Times and Independent said.

The newspapers gave no sources for their information.

All three banks are trading below the price at which the government has offered to buy their shares. If the shares do not recover, private investors are unlikely to take up the stock.

That would leave the government with the highest possible stake in each bank — maximising the risk to the British taxpayer. A reinstatement of dividends could make the shares more attractive to non-government investors.

Lloyds shares are of particular concern to the government due to its plan to buy mortgage-dependent HBOS in a life-saving deal. Lloyds, which shed 6.6 percent of its value on Tuesday, has already renegotiated the terms of the deal once because of the declining price of shares in both banks.

Lloyds has traditionally paid a generous dividend as part of its business model, which has been more cautious than that of other banks.