Like a fashionista with a new handbag, Lloyds has been showing off its fresh-out-of-the-box dividend. It is the bank’s first since the crisis, so a moment for chief executive António Horta-Osório to savour. And how better for the bank to underline the gap with rival RBS, whose accessories look so last season? Lloyds’ capital ratio stands at a healthy 12.8 per cent, RBS’s at 11.2; Lloyds has more or less finished its restructuring, RBS is making changes to its investment bank; and the UK government has cut its stake in Lloyds to under 24 per cent, but still owns 81 per cent of RBS.

Yet trends at the two are similar. Underlying profits at both are rising as charges for bad loans fall. Lloyds’ bad loan charge more than halved last year, helping it to deliver £1.5bn of net income and providing the basis for the dividend. Both are also cutting costs. And neither is seeing much growth in the loan book — at Lloyds it rose just 1 per cent; at RBS it is still shrinking.

Lloyds shares have slipped 5 per cent in the past year; RBS’ have risen 13 per cent. Government selling is part of the explanation for Lloyd’s underperformance. Over the past year the Treasury has sold 6.2bn Lloyds shares, 9 per cent of the total.

So, with similar overall trends off a stronger base, and much less official selling to come than its rival, Lloyds should be the better investment, right? Not necessarily. Valuation will work against it, for one. Lloyds had a strong 2013 as investors backed the restructuring story, and at 1.3 times book value its shares trade at a 50 per cent premium to RBS. And while the first dividend is a nice moment, the 3 per cent forecast yield for this year is far from the highest in the sector.

If RBS chief executive Ross McEwan can produce the targeted 12 per cent return on tangible equity by 2019, then the shares will move from 0.8 times book value towards 1 times. At that level, the government may start selling. That would be something to show off.

Email the Lex team at lex@ft.com

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