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Banks ask UK gov't to lift dividend ban

British banks benefiting from the government's Ł37 billion ($65 billion) bailout are seeking to lift the dividend ban imposed as a condition of the cash injection, sources familiar with the matter said.

“There are discussions ongoing to try and reach an accommodation on this point,” one source said on Wednesday.

“Conversations are going on,” said another.

Analysts said Lloyds was best placed to push for changes to the package because suspending its dividend - one of the most generous in the FTSE 100 - could erode its shareholders' support for the bank's government-engineered takeover of rival HBOS.

“This risks Lloyds shareholders not approving the deal,” said Fox-Pitt, Kelton analyst Leigh Goodwin.

“Reinstating or amending the dividend conditions is a necessary step. It may or may not be sufficient to keep shareholders happy, but it will certainly be very helpful and a step in the right direction.”

Asked if talks were taking place the Treasury said the government's bailout package had put the banks on a stronger footing and would help stabilize the banking system.

“The details were set out clearly by both the government and the individual banks on Monday,” a Treasury spokesman said.

Under the bailout package, unveiled on Monday, Lloyds and HBOS and Royal Bank of Scotland will receive up to Ł37 billion in public money between them.

RBS, Lloyds and HBOS declined to comment. (Reuters)