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Banks dive after Lloyds nationalised
Nick Goodway9 Mar 2009
More than £6 billion was wiped off the stock-market value of Britain's big four High Street banks today as investors reacted badly to the weekend nationalisation of Lloyds Banking Group.
Chairman Sir Victor Blank and chief executive Eric Daniels held urgent meetings with the bank's top investors, trying to persuade them they had no choice but to let the Government take majority control in return for insuring £260 billion of toxic assets.
Lloyds shares crashed 6%, falling 3.3p to 38.7p. When the Government bought its initial stakes in Lloyds and its ill-fated merger partner HBOS at the start of the year, it paid 173.3p and 113.6p respectively for its shares.
That gave the taxpayer a 43% stake in the merged group, which will now rise to 65% and could go as high as 77%. The rest of the banking sector fared just as badly.
HSBC, which is in the midst of a £12.5 billion rights issue, fell 273/4p to 333p. The other nationalised bank, Royal Bank of Scotland, was off 1.5p at 18.3.p. John Jackson, head of equities at Killik, said: “The shares will remain very volatile and hold limited attractions for investors other than as a high-risk option play.”
Nomura's Robert Law said he believed “there is a strong likelihood the group will need to strengthen its capital further”.
Several analysts highlighted the fact that Lloyds is paying much more for its Government guarantee over toxic assets than Royal Bank of Scotland did two weeks ago.
Lloyds' basic fee is 6% of the £260 billion of assets covered whereas RBS's basic fee was 2% of the £325 billion it had covered. But assuming the guarantees are triggered the costs soar to 16% at Lloyds and only 9% at RBS, according to Deutsche Bank analysts.
Andy Penman of Barclays Wealth said the week-long delay in Lloyds reaching agreement with the Treasury cost it dear. Far from managing to avoid the taxpayer stake rising above 50%, Lloyds has ended up much further under Government ownership than most people had expected.
Reader views (4)
Alex,
The only thing you missed out was closing down the Stock Market for a period of time.
These serial gamblers are forcing us deeper and deeper in to Recession. They would serve more purpose if they went round the streets scraping chewing gum off the pavement.
- Andrew, London, 09/03/2009 22:34
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Perhaps another solution to the UK's banking woes would be for the closure of the Bank of England and transfer all control of the UK's banks and financial institutions to the European Central Bank and let the Germans take control. Who know whether the German tricolour of the BoE may restore confidence ?
- Arthur Lincoln, Roeselare, Belgium, 09/03/2009 17:51
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The Government needs to act fast:
1. Nationalise the Banks, take control, and force the Banks to start providing mortgages (& loans) to us at reasonable rates, based on a 10% deposit and 4 times income/salary.
2. Create a National Mortgage Bank for the purpose of providing mortgages and make available loans of at least £3 B each month. Axe the Stamp Duty for the next 12 months.
3. Create a National Small Business Bank, as suggested by the Director of the CBI. Ensure the new Bank pumps at least £3Bn into the economy every month.
Create a new Bank for Renewable Energy and Energy Efficieny to invest in the sector.
4. The new Banks to provide more low interest loans and grants to encourage energy efficiency in the home and the office/factory.
5. Dismiss all the senior staff of the BoE, the FSA, the Treasury, the Banks and the Cabinet Office.
5. Freeze all the assets of the Directors and senior managers of the Banks and Hedge Funds, which have committed fraud, pending a full investigation. Prevent them from leaving the country.
6. All assets from City bonuses to be frozen in accounts whether in the UK, the EU or offshore accounts pending further criminal investigations regarding the activities of the major Banks and Hedge Funds.
7. Investigate the role of senior mmembers of the Labour Party & the Conservative Party re their role into the financial frauds and malpractices in the city, which have damaged the real economy and resulted in job losses across the country.
- Alex, London, 09/03/2009 15:24
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The cure for current UK financial crisis should be the devaluation of the Poound. This way , UK domestic properties will keep all their values and at the sametime exports will boom. Look at China came from low exchange rate to forced revaluation through cheap labour of reprocessing imports - so the argument of low pound will increase import costs does not exist.
- CK, Northwood, Middx, 09/03/2009 14:54
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