Jim Armitage: Lloyds should be banking on the small businesses

Lloyds bank is reported to be handing back £2 billion to its shareholders. At this news, you are supposed to skip around in the streets, perhaps kissing the manager of your local branch, if it hasn’t been closed down yet.

Forgive me, but I won’t be cheering.

I understand, though, that Lloyds deserves congratulations for reaching a position where it can even contemplate having £2 billion spare. After all, it was less than a decade ago that the place was almost bust.

By this measure, a bumper buyback can be seen as a sign of the bank’s confidence in its finances despite the wobbly economic outlook.

But think of the difference that cash could do for the British economy if Lloyds lent it to businesses wanting to expand or invest in making themselves more productive.

The financial crisis may be behind us, but smaller firms still find it difficult to access funds. They must find it galling that the bank which monopoly regulators allowed to become so dominant in the UK is dishing out money to shareholders rather than them.

Share buybacks are popular with short-term investors for obvious reasons. They feel like money for nothing and can boost share prices. That helps directors and fund managers hit performance targets. I get that, but at a bank that is so crucial to supporting the long-term health of the wider economy, it just doesn’t seem the most creative use of cash.