Lloyds Banking Group (LON: LLOY) has now deployed approximately 72% of its £1.75 billion share buyback programme, with shares trading close to double the bank’s reported tangible net asset value.
The bank paid an average price of 111.64p per share across its last two trading sessions, purchasing 14 million shares in total across July 14 and July 15.
That average purchase price sits almost 93% above Lloyds’ reported tangible net asset value of 57.9p per share, a figure that excludes intangible assets from the calculation.
All 14 million shares acquired across the two sessions are earmarked for cancellation, as Lloyds continues reducing its total share count to boost earnings per share.
Repurchasing shares above tangible book value still lifts earnings per share, but it simultaneously compresses tangible net asset value per share when the balance sheet remains broadly flat.
At 111.64p, every £1 billion deployed into the programme can retire around 896 million shares, a far smaller number than the 2.26 billion shares the same capital would have purchased at Lloyds’ 2022 average price of 44.16p.
Lloyds shares were trading at 112.85p in morning London trade, up 0.3% on the day and sitting just 2.7% below their 52-week high, placing the stock at 1.95 times its March tangible net asset value.
Through July 15, the bank had spent £1.253 billion buying back 1.266 billion shares at an average price of 98.99p each, leaving roughly £496.5 million, or 28.4% of the total programme budget, still unspent.
The current programme’s average purchase price is 28% higher than the prior completed buyback, and now more than double the 2022 average, meaning each pound of capital buys back a progressively smaller slice of the company.
Lloyds’ first-quarter results provided the financial backdrop supporting continued shareholder returns, with pretax profit climbing 33% to £2.025 billion and underlying net interest income rising 8% to £3.569 billion.
Return on tangible equity reached 17.0% for the quarter, and CEO Charlie Nunn stated, “We are confident in our delivery for the year ahead,” with the group maintaining its return on tangible equity target of over 16% through 2026.
Compared to peers, Lloyds’ valuation premium is notable, as NatWest posted a higher first-quarter return on tangible equity of 18.2% yet trades at a multiple roughly 17% below Lloyds’ current price-to-tangible book ratio.
Barclays recorded a 13.5% return on tangible equity and carries a price-to-tangible net asset value multiple approximately one third lower than Lloyds, underlining the premium the market is awarding to Lloyds’ earnings profile and capital strategy.
The premium could narrow even without a share price decline if retained profits push tangible net asset value higher at the half-year reporting stage, though slower lending growth or rising impairment charges could erode the returns underpinning the valuation.
Investors have fewer than two weeks before Lloyds publishes its half-year results and strategy update on July 30, when markets will examine whether retained earnings are lifting tangible book value quickly enough to keep pace with the price being paid in the buyback.
