UK taxpayers today were, for the first time, sitting on a profit from their share of the troubled Royal Bank of Scotland and Lloyds Banking Group.

The combined 70% stake in RBS and 43% stake in Lloyds were worth £500 million more than when the Government took charge of them last autumn to save the hobbled banks from collapse.

It was the first time the investments have shown a profit — albeit on paper rather than in Treasury coffers — and gave rise to speculation that ministers are preparing to sell the shares.

The taxpayer was sitting on a loss of £26.5 billion in January when RBS shares were trading at 10.3p and Lloyds was at 33.3p.

But today RBS was up 2.1p at 55.9p and Lloyds was 0.7p higher at 108.5p.

The rally has coincided with a dramatic rise in share prices around the world as the banking crisis eased and pundits declared the recession has ended.

However, analysts warned that the rally could be short-lived — particularly if the UK economy does not recover as quickly as optimists driving the market believe.

Ruth Lea, economic adviser to the Arbuthnot Banking Group, said: “There are some brave folk who suggest that Britain will experience a sharp V-shaped recovery and the economy will grow buoyantly next year. But this is not credible.”

City experts also said the shares will have to rise far further for the Government to offload them at a profit given the discount needed to sell such large stakes.

James Hamilton of Numis Securities said: “The stakes are enormous. If you wanted to place those stakes you would be placing them at a huge discount to the market price.

“If the Government wants to extricate itself from its positions it would need the shares to be trading at a very large premium so they could get out at a profit.”

UK Financial Investments, the body set up to look after the Government's stakes, has always insisted it is a long-term investor and that returning the shares to the private sector will be challenging. The Government ploughed £20 billion into RBS, at an average price of 50.5p a share, in exchange for a 70% stake following the collapse of Lehman Brothers last autumn. With shares at 55.9p today, the stake was worth £22.2 billion.

It spent £14.5 billion on its 43% stake in Lloyds — down from the initial £17 billion through a restructuring of the debt — at an average price of 122.6p. Current losses of £1.7 billion are just about offset by the gains at RBS.