The difficulties experienced by The Co-Operative Group have been well documented in recent months, with it ducking out of a deal to buy over 600 branches from Lloyds (LSE: LLOY) (NYSE: LYG.US) being a key part of this.
Indeed, the problems at The Co-Operative Bank in particular could end up having a major impact on shareholder of Lloyds, simply because it will mean less competition in future. With The Co-Operative group no longer seeking to expand their banking arm (or so it appears from the outside, at least) it will mean one less major challenger to UK banks such as Lloyds.
This is highly significant because, not only was The Co-Operative a challenger to Lloyds, it was a very, very large challenger. The likes of Metro Bank, Virgin Money and other challengers may be doing a great job and may be winning new customers; however, they do not possess the scale and size of The Co-Operative Group and, as such, are unlikely to mount a significant challenge to Lloyds.
Therefore, Lloyds seems to be in a much stronger position now that a major rival is going through an extremely difficult period. This is clearly highly beneficial to Lloyds and is good news for its shareholders.
Something else that is good news for investors in Lloyds is the very generous payout ratio targets set by management. While Lloyds is set to pay out one-third of profits in 2014 to shareholders, this is set to be increase to two-thirds by 2016.
Such a generous payout ratio could prove highly beneficial to shareholders, since interest rates remain low and the continued improvement in the UK economy could lead to inflationary pressures. This would make a higher dividend even more appealing.
Interestingly, an improving UK economy would also be good for Lloyds, since it could mean more loans and more fees for those loans. Therefore, while current forecasts price in continued UK economic growth, both the UK (and, by default, Lloyds) could surprise on the upside.
Indeed, the mixture of an improving UK economy, an increasing payout ratio and a lack of sizeable challengers seem to point to a purple patch for Lloyds. As such, it could help you to retire early.