Morning:
8°c
Banks given hopes of a dividend payout after revolt over £37bn rescue
Paul Waugh and Nick Goodway15 Oct 2008
- Markets get real in the shadow of recession
- Libor falls following bailout but borrowing costs still high
- Act now to avert next crisis, Brown tells leaders
- Perhaps the firewall went too far ... but it avoided disaster
- Hail Gordon, king of a new world - for now
- It's payback time for the City's greedy freeloaders
CITY hopes of a government olive branch over the terms of the £37 billion bank bail-out rose this afternoon amid claims that dividends could be paid to shareholders.
In a day of intense negotiation, banking sources suggested that the Treasury was discussing ways of “clarifying” the part-privatisation of Royal Bank of Scotland, HBOS and LloydsTSB.
Chancellor Alistair Darling was facing a City revolt over the hardline terms of the deal, which bans the payout of a dividend until all taxpayers' money is repaid.
But it was claimed that the detail of the deal would allow dividends after a year, as long as the banks can prove their balance sheets are healthy once more.
The Treasury today confirmed that negotiations were “ongoing” but stressed that none of the headline terms of the deal had been changed.
Sources said that any clarification would depend entirely on whether ministers decided it was in the taxpayers' interest.
“Any changes would require our permission,” a source said.
Earlier the Government had come under fire for its decision to stop dividends being paid out and to ask banks to return to lending levels of last year's boom.
Falls on Monday and yesterday in the share prices of RBS, HBOS and Lloyds TSB prompted senior bankers to urge the Treasury to water down its plans along the lines of the package unveiled by President George Bush.
Despite a wider rally in the FTSE, shares in the three British banks have continued to plunge.
All three are worth less than when the Government offered to buy their shares, leaving the taxpayer with a paper loss of nearly £3 billion.
Downing Street and the Treasury played “hardball” with the banks earlier today, insisting that they were in no mood to renegotiate the deal.
Whitehall officials pointed out that the banks had failed to grasp the scale of the crisis as late as last week. One Government source said: “It's hardly surprising that the banks are coming under pressure from their own shareholders. But the banks made their announcements alongside the Government and entered into this voluntarily.”
William Hague, standing in for David Cameron at Prime Minister's Questions, attacked the Government for the confusion over its stance on bank lending. He pointed out that Business Minister Baroness Vadera had said no bank should be “forcibly” required to lend at 2007 levels.
Some critics claim the Lloyds TSB takeover should not now go ahead because it will harm competition and give the state too much control over mortgages and saving. They argue the merger is not needed because HBOS can be rescued by the government cash injection alone.
A spokesman for the Prime Minister said he had no plans to change his decision to allow the Lloyds TSB merger with HBOS to go ahead.
City traders feel that the £6 billion rescue of Halifax owner HBOS by Lloyds TSB is looking in jeopardy. When Lloyds launched the takeover bid, personally brokered by Gordon Brown and Sir Victor Blank, Lloyds' chairman, it valued HBOS at £12.2 billion.
Reader views (46)
It is the duty of Lloyds TSB directors to serve the best interests of their shareholders and customers. The proposed HBOS takeover is clearly against those interests as it has severely depressed the share price, reduced and possibly abolished the dividend and turned the bank from (according to its advertising) the safest in the UK into a venture so risky that it has been obliged to run to the government to borrow money from the taxpayer - and at an exorbitant rate of interest.
Lloyds TSB should call off the deal, look after its shareholders and customers interests and remain a proud and solid bank.
As for HBOS, it should stand on its own feet - or go begging to Brown and Darling.
Julian Roberts
- Julian Roberts, London England, 30/10/2008 15:34
Report abuse
So hang on first they hold a gun to our heads and get the money, then they moan about the conditions they are getting the money at and they are STILL not lending?What is happening?Wake up everyone!Every business owner should be petitioning Downing street-where are all the business associations-ask them why you pay membership dues.
- A Moreno, Luxembourg, 16/10/2008 08:34
Report abuse
Government preference shares at 12% far too much to pay and no dividends,Lloyds TSB should walk away from the HBOS deal. This firm is bust and the problems will only get worse. If Lloyds TSB needs the money then they should raise the money privately and let Brown look after HBOS. I think that Mr Daniel of Lloyds TSB has had his day.
- Stan White, leeds, 16/10/2008 07:20
Report abuse
I'm a small investor coming up to retirement, and like a good little boy I actually listened and acted on Financial Adviser's advice.
Consequently, the shares part of my Pension nest-egg in Lloyds and HBOS has lost a huge amount of cash - all siphoned into the boss's and speculator's pockets.
Personally, I don't want either Lloyds or HBOS to take the Government money, and as a small investor, I'll take my chances on the shares recovering - there isn't much left to lose.
As soon as this Government gets involved, the businesses are doomed to perpetual interference and abject failure !
- Cap, london, uk, 15/10/2008 22:15
Report abuse
The rather mean and envious attitudes of the Brits is preventing them from making clear, coherent and correct decisions in a very dangerous time. They appear blinded by jealousy and envy unlike any other country. I think this is the most dangerous aspect of what is happening in the UK and will lead to its downfall. You need to make correct decisions and stop trying to "settle scores" in some weird form of class warfare. If you can't do so then you may all lose.....Good Luck
- Kr, Cap Ferrat FRANCE, 15/10/2008 19:19
Report abuse
Putting politicians in charge will only permit them to start deciding how the banks are run. We only need to look at the HBOS/LloydsTSB failout, G. Clown decided that jobs needed saving in Scotland, nothing to do with economics everything to do with politics:-( Next there will be no foreclosures in nulab constituencies...
For dividends how about allowing dividends but no higher than the money repaid to us taxpayers, who have failed them out.
For fat cats, how about no salary greater than ten times the average salary? If they don't like it tell them to leave without compensation otherwise close the bank and offer to re-employ at half salary without a pension. Shareholders should have something to say about this.
- Tonyw, London, 15/10/2008 17:25
Report abuse
No dividends indefinitely, or until Gordon Brown allows it! Well that's reassuring! As a small investor in Lloyds TSB I am being asked to agree to a deal which is going to cost me about £800pa. Will I support the take-over of HBOS? Well, do turkeys vote for Christmas? All Lloyds TSB share-holders should reject the deal outright.
- Patrick, Sussex, 15/10/2008 16:52
Report abuse
Matthew of Chesham,
yours is exactly the sort of view I was talking about.
what you say is simply not an informed view, no matter how comforting it may be to you to believe.
that you would cut off your own nose to spite your face is one thing, that you would refuse to believe that this is what you are doing until the blood drips down is even more informative.
- Scott, London, 15/10/2008 16:15
Report abuse
There is no way that the government should be taking too much credit for the structuring and bailout of the UK Banks as it was the poor controls and direction given by the government that caused this mess. Surely tighter regulation is called for.
- Gjm, London EC2, 15/10/2008 15:33
Report abuse
Give me a break.
Brown is simply digging himself out of the massive hole he dug. And yet again it is tax payers money that Labour rely on to bail them out of their failed policies.
Economy doing great, everybody living on credit. Brown takes the credit. Suddenly everything goes tits up, nothing to with Brown, "Market Forces" apparently.
- Frank, Home Counties, England, 15/10/2008 15:02
Report abuse
As a LLoydsTSB shareholder I would prefer they did not take the money as I suspect LLoydsTSB could raise sufficient in the same way as Barclays. I also believe that the folly of a merger with HBOS should not not pursued. I think the twin reasons for the pursuit of that merger when it is not in the interests of LloydsTSB are:
(1) potential enoblements for some later on in the day.
(2) pension funds who also hold HBOS stock and who are not considering the best interests of LloydsTSB but instead the overall effect on their portfolio.
The bail-out is also a bad thing of itself because it is designed to encourage high risk lending which got some banks into the mess in the first place. The reason for this is fundamentally political and lies both now and historically at the door of politicians who feel they need an inflated housing market to encourage perceptions of wealth and to provide security against increasing levels of personal debt which in turn drives the economy.
- Julian Simmonds, London, 15/10/2008 14:48
Report abuse
The usual ignorant anti-banker rants on here are pathetic. The banks being bailed out are high street lenders who do not pay large bonuses. The main board directors etc earn way less than investment bankers in a bad year! These banks were brought down because of Mr Joe Public borrowing too much and now can'r repay the mortgage, credit cards, car loans etc.
The Brown takeover of the banks should be temporary, with the dead hand of the State removed in no more than 5 years time. Te amazing assertion that suddenly Brown is a hero simply beggars belief! He is responsible for the policies which caused this mess, he is dog meat, toast, brown bread.
- James, New Malden, Surrey, 15/10/2008 14:38
Report abuse
I am or shall I say was a shareholder in Bradford and Bingley so have recently lost all my investment.
However, I agree with the government on this one, if shareholders want dividends and better rights than they should finance the banks themselves through a rights issue do not go begging to Gordon Brown.
In the US, banks expected a free hand out and did not expect part nationalisation. They will have a different view now.
You will suddenly notice that banks who were claiming for help suddenly finding a private solution and cash uner the bed.
I do not sympathise with the spread betters and speculators who drove our economy into recession.
If you are a gambler, sometimes you win, sometimes you lose. I am one and have no regrets.
There are no free lunches on offer.
- B&B Shareholder, London, 15/10/2008 14:20
Report abuse
The fat pigs are only bothered about losing their bonuses
- P I Staker, London, 15/10/2008 14:00
Report abuse
Given that the actions of bankers has in its own inimitable way made Robert Mugabe a front runner for the Nobel Prize for Economics, I think that firstly the bankers themselves are in no position to demand rights for their shareholders when their very existence required them to go cap in hand to the taxpayer for support, and secondly presumably banks have paid their fair share of corporation tax to the Exchequer in the first place to justify such support ?
Reckless bank lending and poor risk management created this crisis which will cost a lot of people their livelihoods, so forgive my stoicism towards shareholders and I trust the Government will hold its nerve and demand banks do what is necessary for the greater good of the wider economy
- John Bloomfield, Twickenham, Middlesex, 15/10/2008 13:55
Report abuse
Brown is borrowing even more money so that the banks can borrow from each other so that we can borrow from the banks. The crunch started because the banks tried to stop this crazy thing. Brown wants it to continue.
- Simon Sewing, Sterling, Scotland, 15/10/2008 13:47
Report abuse
dear oh dear, get a grip...
It's not "your" money - you pay your taxes and the government spends them as it sees fit. If you don't like how NuLabour spends your hard earned tax, then it serves you right for voting them in, you pathetic clowns...
Incidentally, tax revenues will be down as a result of all the unemployed bankers, who incidentally have kept UK plc afloat for the last couple of decades, as our manufacturing sector sucks big time... As govt spending budgets tend to get set in advance of global financial meltdowns, you'll find that the bank bail-out is, as such, an unanticipated spend, which will ultimately have to be funded by an increase in govt debt.
Which you'll all pay for by increased taxes over the next decade...
Me ? I'm bothered - my bonuses from previous years have long since paid off my mortgage and put my kids through private education. Retirement and a final salary scheme pension beckons - toodle pip !!
- Richard, london, ENGLAND, 15/10/2008 13:46
Report abuse
Oh, so it's not good enough for them now is it? Fine. Withdraw the offer and let them go bust. Their greed just seems to know no bounds at all. Earning enormous profits for decade after decade, bonus's flying around like confetti, then the second it goes pear shaped due to their own rampant greed they want taxpayers money as well. Then when a few safeguards are included they go nuts.
They make me sick. Don't give them a penny.
- Matthew, Chesham, 15/10/2008 13:40
Report abuse
If there was no bailout then the shares would be worthless in any event - this at least means there might be some benefit for shareholders in the future. What are the City trying to do? talk up a further fall in the stock market perhaps (from what I recall over the last few days the stock market has actually risen as a result of the bailout which means shareholders are better off already)
- Andy, London, 15/10/2008 13:33
Report abuse
some of you footpath experts might be curious to know, that rather than demonise these bankers from an industry you know plainly little about, you should focus on your losses as shareholders.
and I don't mean as taxpayers - you're pension funds are heavily invested in these companies.
another hypocrisy is whining about the falls in your pension schemes, while demanding banks be left to fail.
just a thought 
- Scott, London, 15/10/2008 13:10
Report abuse
The requirement that part-nationalised banks ensure "the availability of lending" to homeowners and businesses at 2007 levels or higher is wrong. Ministers should not tinker with the financial sector at such a critical time even if it is politically expedient.
However if Gordon Brown has driven such a hard bargain with these banks in exchange for taxpayers' money, it is probably the first good thing that he has done since he became Chancellor in 1997. This aid is all about baling out the fiancial sector which generates 12% of our GDP in the national interest. It is not about protecting the dividends of banks' shareholders.
Banks live in the real world of commerce where negotiations are tough. If they were on the other side of the deal, they would drive as hard a bargain as they could.
I never expected to say it but "well done Gordon Brown" on this occasion.
- Martin Fielding, London, England, 15/10/2008 13:10
Report abuse
Where have all the political polls gone? When things were going badly for Gordon there seemed to be a daily poll reminding us how the Tories are racing ahead. Since the Tory conference and Gordon's re-emergence as a force to be reckoned with, I can't remember seeing a single one.
- Richard, LONDON, 15/10/2008 13:09
Report abuse
Stuart,
I think the talent had already left the banks, that is why they got into this mess. Overconfidence without solid expertise.
Its the burnt hand that teaches best - perhaps we can get back to a less "glutonous" way of behaviour.
- also why in the billions that are being bashed around, why couldn't we have just written off third world debt!! - however far we are going to fall, there are still a lot of people on this planet who are in a lot worse state
- Jc, se1, 15/10/2008 12:57
Report abuse
If the objective is to retain a private banking system then a rescue has to be framed to attract private investment. The Government does not seem to have grasped the compromise needed.
The price to the economy will be far higher otherwise.
- Mike Newland, London, 15/10/2008 12:50
Report abuse
I couldn't give a stuff about whether this deal is fair for shareholders or, for that matter, if it's in their interests! We the taxpayers are the ones that are having to bail these institutions out for their feckle and irresponsible behaviour. If they don't like the meal that's on the plate (and I hope Brown and Darling don't buckle to those whining) then they don't have to eat it - and are more than welcome to raise funds on their own terms else where. The banks should not be given a choice - either take the deal OR suffer going under! Honestly, these banks are behaving like small children that, even though they know they've badly misbehaved, are asking for a sweeter and softer punishment??!!
- Ali Sichilongo, London, 15/10/2008 12:49
Report abuse
Just imaging a banker on the decks of the sinking Titanic - 'Oh gosh, I wouldn't be seen dead in that drafty old lifeboat - I want one with a bar and haute cuisine - more to my liking and refined taste'
Nice to see the contrition didn't last too long.
Stuart - you worry about losing talent overseas - what talent is this then, or was this mess caused by all the 'untalented' bankers?
- Alfie, london, 15/10/2008 12:41
Report abuse
Our pension funds are among the shareholders. The less they get, the less pensioners ultimately get. Maybe Gordon Brown could think of reversing the tax changes he brought in years ago that have caused such losses for pension funds.
- Susan, watford, 15/10/2008 12:40
Report abuse
Demanding that the banks lend to 2007 levels is irresponsible and proves that Gordon Brown's policies are not getting rid of boom and bust but fuelling it. House prices should never have been allowed to increase at the rate they did as it created a speculative bubble which has to deflate at some time or other. What idiot believes that having policies which re-inflates house prices is in the long term interest of the country? Of course, this is the point; Brown is not interested in the long term, only in the short term and there is no feel-good factor that is effective as your house's value increasing at a high rate. Brown initiated his bubble-blowing house price policy when he removed the price of housing from the formula used to calculate UK's inflation, so his irresponsible actions are not new.
- Ross, London, UK, 15/10/2008 12:31
Report abuse
Seems ludicrous to me that Banks are being encouraged to lend at 2007 levels when we're seeing rising unemployment.
And wasn't it easy credit that got us into this mess in the first place? Does Brown really think he can do away with boom and bust by using tax payers money to prop up the economy?
And let's not forget that some of the largest shareholders are likely to be institutional companies - that means our pensions and investments.
I also don't see any sense in LLoyds now taking over HBOS anyway yet if they do then the Gov should cut LLoyds some slack regarding dividends. Let's please not let HBOS spoil an otherwise good egg - a merger of this proportion will damage both companies (initially anyway) and we the public are likely to suffer in the longer term due to reduced competition as already pointed out.
In short, Yes to recapitalisation and part nationalisation where required and NO to LLoyds - HBOS deal, 2007 lending levels and reckless city bonuses
- Odeniyi, Maidenhead, 15/10/2008 12:22
Report abuse
The Government needs to act of behalf of the majority of electorates, not a select few bankers and shareholders!
Seems like the bankers want to have their bailout cake and still eat their bonuses!
- Smb, London, UK, 15/10/2008 12:20
Report abuse
Bankers are more concerned that the terms means no bonuses for them!
- Elly, London, 15/10/2008 11:46
Report abuse
The mood has changed - let the shareholders take legal action, and see where it gets them.
- Jon, London, 15/10/2008 11:30
Report abuse
Quite right JC, shareholders/bankers can't have it both ways. No bail-out equals worse prospects than strict controls, doesn't it?
- Suzy, Colchester, Essex, 15/10/2008 11:16
Report abuse
If the banks think they can raise the money some other way like Barclays, let them - they got themselves into the mess.
- Gordon, London, 15/10/2008 11:13
Report abuse
Hi
In the past banks took risk to benefit the tax payers and the ecoonomies. Now is time for them to help the banks. The windfall gains for tax payer on these rescue investments will be much higher than banks made from tax payers in the past.
2009 Economic Nobel prize should go to Prime Minister Gordon Brown and Alastair Darling for solving this global issue and setting a global standard
- Daniel, London, 15/10/2008 11:07
Report abuse
Forcing banks to return to imprudent lending is purely about keeping house prices up for political advantage. Brown will do ANYTHING with your money to avoid a long overdue house price crash.
- Dave, Uxbridge, UK, 15/10/2008 11:05
Report abuse
Who cares about what the city thinks, this governement has just given them 37 Billion pounds of our money, where did this money come from and where was it going to go before these Bankers got it.
The whole system stinks.
- Mr.S.Port, London, 15/10/2008 11:05
Report abuse
Not enough 'jam' on it for the city types. They are so delusional. If the they don't loke they can always look for investment elsewhere like Barclays have done.
- Pete, London, 15/10/2008 11:04
Report abuse
The ' City' not being happy? What about the 60 million or so other inhabitants of this Isle? You guys are lucky that the 'City' is not up in flames yet! Get back to proper work rather than gambling.
- Adrian, London UK, 15/10/2008 11:00
Report abuse
Oh! the cityspivs are moaning are they, good!
- David, London UK, 15/10/2008 10:58
Report abuse
There is no "bail-out"; it is a wealth and power grab by a small coterie of very, very rich bankers. We are being ruthlessly betrayed and our taxes stolen by amoral plutocrats and kleptomaniacs.
- Neil, london uk, Airstrip ONE ., 15/10/2008 10:58
Report abuse
This deal in absolutely not is shareholders interests - they are being robbed. The banks pay 20% of the FTSE-100's dividend payments - £20Billion - and this deal devalues values the companies to not much more than one years profit.
Lloyds-TSB shares are basically worthless due to the toxic government investment. Until they offered to help the UK banking system they were in a healthy financial state. For that act, the shareholders are supposed to give their investment.
It would better that the entire bank system is sold off to a sovereign wealth fund at a vastly knocked down price .. wait ..that is exactly what is going to happen.
RBS and Llyods will go to market with severely depressed share prices (thanks largely to government action) and raise their Tier 1 ratio using very expensive funds that will come from abroad. The future profits (and the banks are still very profitable) will then shift from UK pensions, to the Middle East.
I can't think of a scheme better designed to damage the UK economy.
- Peter, London, 15/10/2008 10:57
Report abuse
just a touch of caution here, there needs to be a balance. If the bailout forced banks ect to pay less and give less bonuses we will lose the talent in banks to other countries, like UAE ect.
Then we will be left with banks in crisis with lesser talent running them.
Just a thought
- Stuart, Luton, UK, 15/10/2008 10:42
Report abuse
stuff the shareholders. If you gamble you can expect to loose sometimes.
- Fly, london, 15/10/2008 10:25
Report abuse
I think it is a little rich for the city to be complaining about the bail out especially as it was the irresponsibility of the city and the greed of the share holders that got us into this mess.
- Bruce Edwards, London, 15/10/2008 10:16
Report abuse
don't like the bailout don't take it - which would the shareholders prefer.
- Jc, se1, 15/10/2008 10:12
Report abuse
