Tonight:
5°c
State bank rescue leaves taxpayers £6bn out of pocket
Nick Goodway13 Jan 2009
Taxpayers have made a loss of almost £6 billion on shares they have bought or are committed to buy as the Government completes its £37 billion part-nationalisation of three High Street banks this week.
Today it was confirmed that the Treasury will own nearly half the new super-bank created by the forced merger of Lloyds TSB and HBOS. It already owns more than half of Royal Bank of Scotland (RBS).
Bank share prices have plunged since the Government announced its £37 billion bailout of the bank sector on 13 October. Because the Treasury agreed to buy ordinary shares at a fixed price it has been left with massive losses.
Its stake in RBS is worth £2.6 billion less than it paid for it. That in HBOS is worth £2.2 billion less than the Treasury will stump up and the loss on Lloyds is just under £1 billion. Those losses came even after a rise in the sector's shares today triggered by widely-trailed plans to boost lending via Government backing for bank loans.
The Government will argue this is the cost of saving the banking system and that it also gives it the clout to force banks to restart lending to businesses and individuals.
Existing shareholders in Lloyds and HBOS snubbed both banks' new share offers, leaving the Treasury on behalf of the taxpayer to pick up the vast majority of the £13 billion of new shares.
The Government today admitted that means it will end up owning a 43.4% stake in the newly-named Lloyds Banking Group when shares in the superbank start trading on the stock market a week today.
RBS was the first of the big High Street banks to be partly nationalised last month when the Treasury took a 58% stake.
It was always inevitable that the Government would end up buying the vast bulk of the new shares issued by Lloyds and HBOS since they were being sold at a much higher price than the existing shares traded at on the stock market.
HBOS's new shares were issued at 113.6p compared to the existing shares' current level of 841/2p. Lloyds TSB's new shares were sold at 173.3p while the existing ones were today 140.9p.
The Lloyds/HBOS takeover is just one of a host of deals across the world that are changing the face of global banking. Today, the breakup of Citigroup — once the world's biggest bank— came closer as it neared a deal to merge its Smith Barney brokerage with Morgan Stanley's operations. Such a deal, expected in days, would create the world's biggest retail brokerage and mark the biggest step yet in dismantling Citi.
“Governments are going to say, You are very big institutions to be bailed out, and it would be good if you were smaller and more manageable,” said MF Global analyst Simon Maughan.
Reader views (12)
the goverment took there eye off the economy to concentrate on iraq and afghanistan that is the main reason but TONY BLAIR DOE=SNT SEEM TO BE IN RECESSION
- J Windsor, LONDON ENGLAND, 13/01/2009 13:42
Report abuse
There will be much more scandals like this. The lack of financial knowledge of Crash Gordon's "super team" is becoming clearer.
- Peteo, London, NW1, 13/01/2009 12:53
Report abuse
The UK recession will soon become Depression with that Gorden Brown around! The sooner he is gone the better.
- Georgie, Islington, London, 13/01/2009 10:55
Report abuse
Did Crash Gordon not blast out that we would be winning money?!
- Jacqueline, Hampstead, London, 12/01/2009 18:45
Report abuse
This is repairable, as soon as stock markets pick-up, the next Conservative Government can sell the stake and hopefully cash-in. Unlike the rest of Nu LAbours mistakes
- Martin, Nr Reading, UK, 12/01/2009 18:23
Report abuse
. what do we expect after he sold our gold at rock bottom ...!!!
- Marke, Houston, Texas, 12/01/2009 17:48
Report abuse
The UK Government that represents me (tax payer and citizen)has now basically bought the bank which has lent me the money on a loan. So effectively the Government has spent my taxes bailing out the bank which lent me money. Does this effectively mean I will be paying interest on my loan to myself!? Excellent when do I receive the interest payments as I've got a bloodly big loan to payback! Totally surreal!
- Stuart, UK, 12/01/2009 17:05
Report abuse
If only it would stop there. Crash Gordon seems to spend and waste like there is no tomorrow. I mean... it is not his money and he does not know what to do with so much pounds!
- Pat, London, N1, 12/01/2009 16:57
Report abuse
"Because the Treasury agreed to buy ordinary shares at a fixed price it has been left with massive losses."
With such demonstrable incompetency on the part of Brown, Darling and the Treasury, is it any wonder that Broken Britain appears to now be in a terminal decline and fall?
- Ex-Pat David, Cape Town, South Africa, 12/01/2009 16:37
Report abuse
It's just as well that our Masters of The Universe got their bonuses then. I note that next year they want the targets reduced to allow for the more difficult situation. Please could anybody explain why the vast majority of workers manage to do their jobs without being highly paid and being incented by the prospect of huge bonuses?
- T Brown, Willesden England, 12/01/2009 15:44
Report abuse
Nu-labour may cause the value of your investments to go up or down.
Yes - YOUR investments.
- Dave Davies, Basingstoke, 12/01/2009 15:12
Report abuse
Another typical Bean Brown "investment for the country"...
- Steveo, Islington, London, 12/01/2009 11:24
Report abuse
