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Lloyds in line for second bail-out as shares dive
Joe Murphy16 Feb 2009
A further multi-billion bail-out for Lloyds Banking Group was not being ruled out today as shares fell again.
After a beating on the markets, the merged bank was worth just £10 billion at lunchtime — despite having had £17 billion of taxpayer funds poured in last year.
Ministers remained open to another taxpayer-funded injection of cash and, although it was being played down hard, the last resort option of full nationalisation was not being dismissed, a year after Northern Rock was taken into public ownership.
Treasury minister Stephen Timms said neither a bail-out nor nationalisation was on the cards but, equally, the Government would not shrink from taking action to safeguard the newly created superbank, formed from the merger of Lloyds and stricken HBOS.
Shares in the group slid as much as 22 per cent at one stage today, on top of having a third of their value wiped out on Friday. The tumble was triggered by news it would have to shoulder losses of nearly £11 billion made by HBOS, and fear among shareholders it could be nationalised. “We are obviously watching what's happening but, as I say, I am confident in the long term this is going to be a strong and successful commercial bank,” said Mr Timms.
“We have made very clear through this whole period that we will do what is needed to maintain the stability of the UK financial system.”
On the prospect of nationalisation he said: “We are not contemplating that at the moment. I have made clear we will take whatever decision is needed.” Lloyds is already 43 per cent owned by the taxpayer after last year's £17 billion rescue that culminated in it taking over HBOS. Stung by claims Gordon Brown had made a critical error by driving the merger like a “shotgun marriage”, Downing Street insisted the banks themselves had the idea and pointed out that it commanded cross-party backing at the time.
“The idea of the merger originally came from the companies involved who approached the Government to ask us to change competition legislation to let it happen,” said Mr Timms.
“We are glad we did, and we did it with cross-party support at the time.
“The Prime Minister remains of the view that the merger is in the wider interest of the stability of the UK financial system and I think you have to ask yourself what would the alternative have been, had Lloyds not taken over HBOS at the time.”
Mr Brown enabled the merger by waiving competition rules. But critics say it has rebounded with the conservative Lloyds now having to shoulder HBOS losses. Tory leader David Cameron said the merger was now looking like a “bad decision”.
Speaking to the BBC, Collins Stewart banking analyst Alex Potter said: “We do feel much of this new loss is simply moving from HBOS's aggressive practices to the greater conservatism of Lloyds... however we cannot discount the prospect of Lloyds requiring further capital if HBOS turns even worse.” Panmure Gordon analyst Sandy Chen predicted Lloyds would now make an £11 billion pre-tax loss for 2009, but said “we do not expect this to force a full nationalisation”.
Lloyds shares fell 20 per cent before climbing back. Other banks also felt the pressure. Royal Bank of Scotland was down two per cent, while Barclays shed three per cent.
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Reader views (16)
Ten Billion of debt more problems later. It looks like Mr Daniels and his backers have killed the Lloyds Bank.
- Stan White, leeds, 17/02/2009 07:28
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Focus group and PR campaign yourselves out of this one Lloyds.
- Mr Pastry, Brisbane Australia, 16/02/2009 23:39
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if i run into money troubles can i knock on no 10 downing st and ask for a sub
- D Anastasi, enfield, 16/02/2009 22:47
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Brown must go. He de-established years of City of London traditional regulation and created this mess, together with Blair's abdication of responsibility as his effective line manager. Brown has mismanaged the Crisis over the past 6 months, and made the outcomes worse. Let him join Blair on an oversaes juncket.
- Ed, London, 16/02/2009 17:20
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when the governments finished with bailing out the bankers,
i don't suppose there's any chance they could give a poor boy a helping hand is there?
- Mike O'Brien, london.uk, 16/02/2009 17:16
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Whatever spin Gordon Brown and his Ministers put on this, they cannot pass the buck. Gordon Brown personally pressed Lloyds to take on HBOS and appears to have totally failed to assess the risks involved, despite having access to background information denied to those not in the negotiation loop (such as Opposition parties). Brown and his administration are letting down the country in the most dreadful fashion. The sooner they quit the better.
- James Elliott, Eastbourne UK, 16/02/2009 16:19
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One gets a sneaking feeling if Gordon Brown instead of trying to prop up his voter support had let Northern Rock go under, the air would have cleared by now.
Support saver yes, but shareholders, executives and companies – no thank you. Had Northern Rock gone under in the proper manner, all the other banks would have stood to attention and put their own houses in order. It’s now over 2 years since HSBC recognised the situation, reported it to the market and adjusted its position.
Gordon Brown talks about a free market then immediately tries to manipulate it with his socialist tendencies. The market is about things taking place in a supply and demand manner; create a false set of criteria and it fails.
- Ian, Reading, England, 16/02/2009 14:34
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Let this group go - savers are protected, shareholding is gambling, these lessons need to be learnt and it’ll be a wake up call to all the others playing off against the long suffering overburdened taxpayer.
Nothing to sing and dance about now, is there Howard?
- Darius Midwinter, London UK, 16/02/2009 13:32
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um...
the shares don't open at the closing price from the day before.
they opened at 52.50, and within minutes had risen to 54.50 - not fallen.
- Scott, London, 16/02/2009 12:04
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Again, the banks have taken us for mugs....They knew they were taking tax payers money in return for nothing... Well done Brown
- Dc, London, 16/02/2009 12:03
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Gordon now says he does not regret the takeover of HBOS by Lloyds TSB, and already says he has nothing to regret about his running of the economy. So this disaster was planned, ahwt we see as a messed up economy is as he intended. He deliberately put all these people out of work and onto benefits? He deliberately destroyed the property markets and sold the gold at knock down prices and is now knowingly making it too expensive to own and hold the commercial property that might bring us out of recession.
- Sue Doughty, Twyford, UK, 16/02/2009 12:01
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Simply formally "nationalize" the banks NOW!
. . . Then merge all of the nationailized banks together as there will be no need for top-heavy multiple boards of directors - which will make huge savings.
Finally, downsize the overall number "units" of the newly merged nationalized bank to a responsible level thereby making further colossal savings for the "taxpayer's banking group".
In the meantime, either the Serious Fraud Office or a truly indepentent inquiry MUST investigate whether or not ANY of the bankers have been criminally negligent in their actions leading up to this mess.
- Fraser, Telford Park, 16/02/2009 12:00
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Neil M is now saying what I have been saying since last October.
They are bust.
They should be in receivership.
Please publish pictures of Blank signing on ,but crop his Rolls Royce off the picture.
Marconi bought a dud and paid for it.
So have Lloyds but the taxpayer is paying for it.
Where is the justice in that
- Alan, Llandrindod Wells, 16/02/2009 11:50
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What a mess!
- Julie, London, 16/02/2009 10:42
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I dont understand why this is such a suprise, everyone knew that the best performing bank in the UK should never have gone anywhere near toxic HBOS, now the whole thing looks like it could fall apart, stupid idea that everyone on the street could forsee just a shame that the boardrooms couldn't!
- Alanj, London, 16/02/2009 10:36
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Let it fail. We cannot bail out every bank in the land.
- Neil M., london uk,, 16/02/2009 10:20
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