If a high dividend has been the perennial attraction of Lloyds TSB, the credit crunch has also showed that payout to be the bank’s greatest protector.

Its controversial decision not to cut its dividend in 2004 - which prompted the exit of its finance director - imposed a heavy discipline. The need to find £1.9 billion of cash a year to hand out to shareholders meant focus was on good housekeeping and tight capital controls, precluding it from the sort of acquisitions and loosening of lending criteria that have since proved so costly to its domestic rivals.

Yesterday’s first-quarter trading statement served only to underline the wisdom of that stance. Revenues in all three of Lloyds’s divisions rose faster than costs during the first quarter, with pretax profits showing a “double-digit” percentage increase.

Further, credit market writedowns in the wholesale and international banking divisions were £387 million at the pre-tax level, supplemented by a £740 million post-tax hit to reserves. A glance across to Royal Bank of Scotland and HBOS - which have taken first-quarter provisions of £4 billion and £2.7 billion respectively - illustrate the extent of that achievement.

Not that the stock market, which sent Lloyds’s shares down 3 per cent, was willing to give it much credit. This year’s improvements in underlying trading, particularly the increase in net interest margins in retail banking and a growing share of net new mortgage lending because of the weakness of its competitors, have largely been anticipated. In contrast, a £474 million charge against insurance volatility at Scottish Widows had not, and caused low-level unease.

Leaving the question of further writedowns aside, the bigger question is to what extent Lloyds’s domestic focus could hinder it should the UK economy enter recession. Should GDP begin to go backwards and house prices maintain their recent trajectory, the sort of momentum in profits displayed yesterday will be hard to achieve. That makes Lloyds a less attractive prospect than the geographic diversity offered by a rival such as Barclays, for example.

The other consideration is that Lloyds’s coveted capital strength over its competitors will be less pronounced once the sector’s recapitalisations have completed: notably the combined £16 billion of rights issue proceeds that will bolster RBS and HBOS.

The dilutive effects of those refinancings have also restored the relative attractions of Lloyds’s dividend yield, which had recently looked distinctly ordinary given falling valuations in its sector. The prospective yield is 8.6 per cent on a payout that is covered some 1.4 times by forecast earnings.

Neither does the strength of Lloyds’s franchise in retail and small business banking show any sign of diminishing.

Notwithstanding the threat of future domestic weakness, Lloyds’s ability to manage through tough times implies that at 439p, or seven times 2008 earnings, it remains a relative safe haven. Hold.

RAB Capital

The knock from Northern Rock may have eased but RAB Capital continues to struggle. Shares in the hedge fund manager – once the second-biggest investor in the stricken mortgage lender – fell more than 15 per cent after it gave warning that first-half profits would be significantly lower than last year. The culprits remain its two biggest funds, special situations and energy, whose faltering performance lay behind December’s profit warning. With combined funds under management of about $3 billion, the pair account for around half of RAB’s assets. If there is a comfort, it is that both funds are highly volatile and could bounce back strongly.

That is significant given that their calendar year-end performance is the biggest determinant of RAB’s profits. The other reassurance is that RAB still holds a large slug of cash: equivalent to about 29p a share, or more than half of its stock market value. This indicates that at seven times current-year earnings forecasts, RAB is cheap on conventional measures. However, with the headwinds of which RAB complains – liquidity concerns (especially in the smaller natural resources companies), investor nervousness and market volatility - showing no signs of abating, the shares, even at 52¼p, are best avoided.

DataCash Group

A premium rating requires profit forecasts to be raised regularly if the shares are to follow suit. That much was evident at DataCash, the AIM-listed payment processing specialist, which trades at a heady 27 times current-year earnings. Although the company yesterday reported an 18 per cent rise in 2007 earnings, the shares dipped modestly as 2008 forecasts were left unchanged. That they weren’t can be pegged partly on a shift in DataCash’s business model. Whereas the company traditionally has served as an electronic runner between banks and accepters of debit and credit cards – it handled £12 billion of transactions last year – increasingly it is functioning as an outsourced back office for customers, such as TUI, William Hill and Laura Ashley. Those services are higher-margin but, given expected falls in volume-related revenues, are likely to prove neutral to profits for now.

Through the acquisitions of Proc Cyber and Eurocommerce, DataCash is now more broadly spread, both by customer – gaming, travel and retail predominate - and territory: 45 per cent of sales are from outside Britain. Net cash of £18 million also reassures.

However, until DataCash’s resilience to a consumer downturn can be more clearly established, the shares are up with events. Hold.

Explore Markets

• United States

• Europe

• Japan

• China

• Russia

• The Gulf

• India

• Africa

Times Recommends

• B&B shareholders forced into funding rescue
• John Lewis department store sales plunge 8.3%
• Families turn to credit to cover mortgage bills