LONDON - Lloyds Banking Group said on Thursday that it would exchange for other securities as much as 5 billion pounds, or about $8.36 billion, in bonds it issued to shore up its capital during the financial crisis.
The British bank, which is partially owned by the British government, has about £8.4 billion in so-called enhanced capital notes outstanding.
Lloyds said it would offer to swap those bonds for new securities or, for certain eligible investors, for cash. The exchange will allow the bank to better comply with new capital requirements adopted by the European Commission, the bank said.
“Whilst still uncertain, the group’s management believes recent developments resulting in higher capital requirements for banks, including a changed definition of core capital, make it likely that the ECNs will not provide going concern benefit under future stress tests,†Lloyds said in a statement.
The bank said it would take a one-off accounting charge of about £1 billion in the first half of 2014 if all of the new securities are issued.
Lloyds has seen its financial outlook improve and is seeking to move beyond its legacy issues.
In February, Lloyds said it returned to a statutory profit before tax of £415 million in 2013, an important measure for the lender. The bank last posted a statutory profit in 2010.
For the full year, Lloyds reported a loss of £838 million, compared with a loss of £1.47 billion in 2012.
The British government, which provided the Lloyds Banking Group with a £17 billion bailout during the financial crisis, holds a 33 percent stake in the bank and has made selling its remaining holdings a priority. The government sold about 6 percent of its stake in September.
