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We get £2.3bn back from Lloyds

Robert Peston | 16:24 UK time, Friday, 5 June 2009

Far be it from me to spoil this government's quite astonishingly consistent run of bad news, but there is something mildly positive to say about taxpayers' massive investment in those bashed up banks.

On Monday, and barring an unexpected and improbable disaster, the Exchequer should see approximately £2.3bn returned of the capital it invested in Lloyds Banking Group last autumn.

Or to put it another way, we as taxpayers will get £2.3bn back. Hooray.

Now I know £2.3bn is peanuts in the context of the eyewatering £175bn the Treasury expects to borrow this year (and many economists believe the deterioration in the public finances will be even worse).

But as Tesco might put it, every billion helps.

When this repayment happens, the UK government will be the first government in the world to retrieve some of the cash that's been invested in banks to rescue them from collapse.

It's another sign that - as far as the banking system is concerned - we seem to have passed the moment of most extreme stress.

Here's why I can talk about the Lloyds prepayment as a racing certainty.

Lloyds has been raising £4bn from all its shareholders by selling them new shares, in order to redeem the £4bn of its preference shares held by the Treasury (and managed on the Treasury's behalf by UK Financial Investments).

However, because the Treasury owns 43.38% of Lloyds' ordinary shares, it will buy its pro-rata allocation of the new shares, at a cost of £1.7bn.

Also the Treasury promised that it would buy the remaining £2.3bn of new shares if other shareholders were to spurn the offer.

That said, there's no risk of it having to honour the promise. Other investors are certain to buy these new shares.

How do I know that? Well the new shares are priced at 38.43p, or 43% below the 67.8p market price of Lloyds' existing shares. So shareholders would only choose not to buy them if they were absolutely determined not to make money (I know many of our big investment institutions seem awfully talented at losing money, but it's not actually what they set out to do).

This is the maths: Lloyds is paying taxpayers £4bn in total, but £1.7bn of that is actually being provided by taxpayers (I know this is confusing, but stick with me); so the net repayment to taxpayers will be £2.3bn.

Jolly encouraging.

But it would be premature to crack open the bubbly, in that we are sitting on a stonking loss on our stake in Lloyds' ordinary shares.

The effective purchase price for taxpayers' 43% of Lloyds is 115p per share (or so), compared with a market price that is 41% lower.

So although it's splendid that we as taxpayers are reclaiming £2.3bn, we are still sitting on a £3.5bn loss on our holding of the ordinary shares.

It's just as well then that the Treasury is in no hurry to sell this stake - because it could take years for Lloyds's share price to rise comfortably above what we paid.

UPDATE 17:43

Mea culpa. I should have mentioned in the piece that a few small US banks have already repaid the bailout funds they received from the US government. But none of the substantial US banks have yet succeeded in doing so, although Goldman Sachs, Morgan Stanley and JP Morgan are on course to do so.

It should also be said that Goldman, Morgan Stanley and JP Morgan are in rather better shape than Lloyds.

Comments

  • Comment number 1.

    If the government would keep buying more shares in lloyds then the price will go upwards to the point it originaly purchased them at 115

    On paper ir will then have lost nothing and providing it does not have to sell them the fiction can be maintained that nothing was lost.

    aT WHICH POINT THEY WILL HAVE JOINED THE SLOW BOAT TO CHINA CLUB.

  • Comment number 2.

    So what are you going to do with your GBP383.33?

  • Comment number 3.

    I must take issue with a couple of things you mention:

    a) firstly, several U.S. banks already gave back funds, and so the British government certainly isn't the first in the world to get funds returned as you mention.

    b) secondly, your assertion "we appear to be passed the moment" should, of course, be "we appear to be past the moment"

  • Comment number 4.

    It seems premature to be sitting anything but uneasily on the value of banks. In the Great Depression there was a suckers rally just like we are having now and it was the collapse of an Austrian Bank which triggered a massive new collapse similar to the one we have all just been through.

    The banks have stretched accounting rules to the limit and possibly beyond to get off the critical list; the reality of deleveraging is now hitting home in the Eastern European countries and their currencies are devaluing at a truly astonishing rat; German banks have only dealt with about 20% of the losses they know are on the books. And remember derivatives, and synthetic CDOs (concise and clear article at www.ganeshinthecity.blogspot.com) - well they haven't gone away and as loan defaults are rising this particular house of cards is set to come down like the twin towers.

    I am not being alarmist. These are facts. Unlike the banks, we cannot simply pass these issues to the public purse and start calling them "legacy assets" like they came from someone else. It was the banks who created these "assets" (puhlease), and we are the beneficiaries of the will of the deceased.

    The news seems to have been skewed to green shoots - has a call gone out fron on high to editors. Robert, what is going on in the Eastern European countries has all the making of the next wave of crisis. Why are you not on the case?

  • Comment number 5.

  • Comment number 6.

  • Comment number 7.

    "But it would be premature to crack open the bubbly, in that we are sitting on a stonking loss on our stake in Lloyds' ordinary shares. "



    Well as the small print says "Past returns are no guarantee of future returns. Share prices can go up and down."

    With the way Lloyds was shoe-horned into the HBOS take-over I think they've done remarkably well.

  • Comment number 8.

    I read in the FT today that Martin Wolf calculates the government is forecast to spend £4 for every £3 it raises in tax. Why don't you mention that instead of struggling madly to find good news for Labour? How much difference will £2.3bn make against the massive debt Labour are digging us into? What percentage reduction will this paltry sum will make to the debt mountain?

    Jolly encouraging? Was that a joke?

  • Comment number 9.

    As a lloyds bank group shareholder I certainly took up my shares. A group with such a huge chunk of the UK retail banking market must in the longer term be a shoe in to make serious money in our credit addicted country. That was why may he lloyds management jumped at the opportunity. It is very much be "that which does not kill you makes you strong" in the long term.

  • Comment number 10.

    Why not simply invest the money back into the shares and hold on for the long term?

    While bank shares may not go back up to the highs seen before the banking crisis neither are they going to stay at the current lows when banking returns to normality.

  • Comment number 11.

    My prediction is that the Brown Government will completely fall apart this weekend, with or without talk up on the economy from people in the BBC. The game is up and everyone knows it, except possibly Gordon himself.

    The pay back from the banks is simply on the back of the sucker's rally which has been taking place for the last 2 months. When that goes into reverse, and when the inevitable public spending cuts kick in, the banks will back again with cap in hand.

    The pound took a bashing today and I expect it will drop further once it is clear we are facing an early general election. To say we are past the worse in this crisis is just wishful thinking.

  • Comment number 12.

    Only time will tell if HBOS has not sunk LloydsTSB, fingers crossed...

  • Comment number 13.

    #9. Anthony_analyst wrote:

    "As a Lloyds bank group shareholder ... A group with such a huge chunk of the UK retail banking market must in the longer term be a shoe in to make serious money in our credit addicted country"

    But have you given sufficient weight to the huge problems of actually running the system of such a huge concern? Their banking systems requirement make the NHS computer systems seem trivial. I seriously doubt that anyone can manage the systems of such a large concern and that I believe is the area, that as you put it "does not kill them".

    By the way any more news on how well the CDS etc. is being accounted and the rest of the synthetic financial instruments are being consolidated into the accounts of the Banks? I've heard that it is so complex that the network of different companies that were set up for each individual instrument that in consequence the larger banks have little hope of ever being able to produce anything more that a very vague approximation in their accounts and further that the approximation process is far from immaterial, but no Auditor would dare to break cover on the matter as overall the accounts offer their best guess of a true and fair view. (But it is doubted if such a view would be agreed to if the organisation were not a bank! e.g. Enron - who might now think that they were very hard done by!)

  • Comment number 14.

    Oh please. It would be funny if it were not so sad. How many billions in extra debt and we're getting some of it back. And you think this is good news. Labour spin. Mate, just give up, if thats the best you can come up with. Desperate times indeed.

  • Comment number 15.

    Hang on, we outlay 4bn for preference stock months ago, pay interest to borrow the cash less coupon earned, then pay 1.7bn for new ordinary stock with others to enable Lloyds to repay us 4bn. But we make a profit on the new ordinary stock (? are we selling)to offset the continuing loss of 3bn on the old ordinary stock we own.Has the old ordinary stock been devalued by the conversion of preference stock to ordinary? I agree, lets hold the champagne..

  • Comment number 16.

    In reply with VinChainSaw I argree Lloyds banking group will be the big bank in the strong term if this downturn is going away. Did Gordon Brown claim any expenses it is not in the press.

  • Comment number 17.

    Unfortunately, you've got the maths wrong.

    At the time of the new share issue, Lloyds shares were trading at 100.30. Once the new shares had been issued, they were trading at 76.62, so that someone with 10000 shares saw their value fall from £10030 to £7662, a loss of £2368, because of the dilution of the shares. The Lloyds offer to shareholders, called appropriately enough the Placing and Compensatory Open Offer, was intended to compensate existing shareholders for their loss due to this dilution by offering them 0.6213 shares at 38.43 per share. Thus, a shareholder with 10000 shares is entitled to purchase 6213 shares at a cost of £2387. Assuming a share price of 76.62, these shares can be sold for £4760, thus generating a profit of £2373, pretty much the same as the loss of £2368 incurred by the dilution of shares.

    Those Lloyds shareholders who do not take up the offer will be compensated in cash for the dilution of their shares by having their additional share allocation sold on their behalf at current market rates. Shares not taken up by existing shareholders will not be offered to other shareholders.

    Thus it is quite wrong to say that Lloyds shareholders will take up the allocation because not to do so would mean that they were rejecting an offer of ludicrously cheap shares. Rather, they are being offered additional shares in compensation for the dilution of their existing shares with a cash alternative. Assuming a constant share price, every shareholder who takes up their full entitlement will own exactly the same percentage of the company they did before the new share issue. This includes the Government who, by taking up their allocation, will continue to own 43% of the shares. This percentage will increase if the Open Offer is not fully subscribed and the outstanding shares not sold.

    Your are right in saying that, if the Open Offer is fully subscribed, the Treasury will receive £4bn at a cost of £1.7bn. You are wrong to say that the taxpayers are sitting on a huge loss because the 43% stake was bought at 115p per share. This is true, but each 115p old share is equivalent to a new share at 115 x 76.62 /100.3 = 87.85p. So although the shares were trading at 76.62 and are now trading at 66.2p, the loss incurred is 12.78% and 24.64% respectively of the original £4bn. On the day of the Open Offer, the loss incurred was about £0.5bn and although it is rather more now due to the fall in the share price, it is nowhere near £3.5bn.






  • Comment number 18.

    You seem to have omitted to mention that part of this deal is the the taxpayer surrenders the £4bn 12% preference shares, and the £480 million p.a. dividend. that is payable on them. For this, we receive £2.3bn and we retain 43% of the ordinary share capital of the company.

    So the remaining 57% private shareholders are paying £2.3bn to allow them to continue to hold the same stake in a company that will be £480 million p.a. better off. Am I right in thinking that they will be getting about 12% on their investment ((57% x £480 million)/£2.3bn)?

    Isn't there an argument that the taxpayer would have been better off holding on to the preference shares, and continuing to receive the £480 million a year?

  • Comment number 19.

    11,

    'My prediction is that the Brown Government will completely fall apart this weekend,'

    Me too, no way can Gordo survive, especially when the euro results come in. Its been a whitewash for Labour, they are finished and if he hangs on until next june?

    It will be worse for them.

  • Comment number 20.

    So with a lot of burping and indigestion and the cake gone, a crumb is handed back to the taxpayer by the Billy Bunter Banker. Splendifico. At least there is no order for another cake, oh no I forgot, El Gordo has a 4 year 600 plus billion GBP borrowing programme. What Ho chaps, thats a good wheeze plenty of cakes. An apple for teacher, a cake for the Banker. Its the politicans that take the biscuit.

  • Comment number 21.

    Who is idiot enough to take on leadership of the Labour Party at this point?

  • Comment number 22.

    All of our investments, loans and gaurantees to Banks are national assets that should be 'marked to market' in any sane assessment of our national debts. But those assets are not offset against debts.

    True, the overall net position right now doesn't look fully profitable yet. However, bank share prices are rising and will rise still further as their trading profits continue to grow. And there's continuing fee income and interest on loans as additional Government revenues.

    Whichever Party forms the 2010 government will be able to realise those bank assets in tranches, and throughout the next Parliament. Scaremongering about Government debts is inappropriate.

  • Comment number 23.

    I'll have my share in cash, please, before it goes to pay for some MP's phantom mortgage.

  • Comment number 24.

    Uh Huh A billion pounds thats for show money
    Even when I'm broke I keep some score money
    See they're mad at me and HBOS turned on me
    We play in the summer and work in the winter
    but we refuse to go out like Ray Charles Uh Huh


  • Comment number 25.

    Captain B. to the rescue!!!!

    Wow, you chaps are getting heavy and the maths are getting far too much for a Friday night, but Britain Unlimited is due pay back from Lloyds and Captain B. is not such a silly Billy. He ensured Lloyds paid the country back first and as major share holder Britain will claw back the money.

    Captain B. has cut the deadwood, Walk or get pushed, no difference when facing the plank.

    Brown will survive the European results. Labour will be down, but so will the Cons. BNP and UKIP votes will take up headlines.

    Captain B. is the best man for the job. I hope you dont force him out on Tuesday. Talking about an election will not make it happen. It will result in another unelected PM.

  • Comment number 26.

    Bob mate, you've completely lost it, get to speck savers !!

  • Comment number 27.

    Lloyds suffers from some enormous problems in terms of poor organisation and antiquated and inadequate information systems. It may make money, but it will continue to be a huge liability for causing economic chaos if its atrocious corporate governance is not addressed. It has relied too long on its image, which does not reflect the true state of its internal decay.

  • Comment number 28.

    Why talk about a few measly billions, when we have been lumbered with a trillion (or two) pounds of debt (increasing structurally), once PFI and public sector pensions are counted ? That's the elephant in the living room. Why do the media focus on MPs' expenses when we have much, much more serious problems to worry about ? Challenge Brown on this issue - where are the Labour cuts going to fall ?

  • Comment number 29.

    £2.3 billion Hmmph.
    Look! all this blurb about markets bouncing, trends turning corners,green shoots appearing, banking coming back online as financial speculative pressures diminish is pretty meaningless because there are millions of pensioners going into poverty.

    Remember the formula of six young people contributing to the pension of one retiree per week? It is still about to implode as the demographic faids in shortly coming years. Its causes and impacts are still not going away. The sand is not deep enough! The decreasing numbers of young workers cannot be targeted as a large expanding market and yet what market age is most business aimed at? Expanding numbers of pensioners there are but spenders they will not be.

    Consider this:-

    This pensions hot potato has been past around for thirty plus years. 1980s solutions never took off because only very young workers supported by parents had an excess of income and youth is wasted on the young as someone famouse once said. In reality low income earners have not had real growth in spending power and are no more able to contribute to pensions now as then.

    More and more pressure has been put on the workforce as business gets leaner and leaner and shrinks liesure time resulting in increasing family disfunction.

    So most people on low incomes have less and less opportunity to relieve that stress.

    Certain of the workforce have gained greater and greater benefits for not actually participating in these tighter and tighter regimes other than by setting them up. (evidently, not being restrained to the Rawlsian priciple of making the rules without knowing what participation they are to take in them.)

    The system is as mad as changing Government when a financial rescue bid is being made! Who are the more irresponsible those with an initiated plan yet fully set or those in oppostion who want to abandon it immediately with no plans of their own of rescue? Yes get them out now rather than later and damn the consequences.... Rocks and hard places v black kettles... total madness stoked up as usual by the press springs to mind.

    With this same madness we are forgetting the pensioners. Those who will shortly be the majority. Yes the majority who have earned such low wages they have not been able to save. and are now doomed to live off around £100 per week. 'I wouldn't get out of bed for that' I hear some say. 'They should have worked harder in school' I recently heared an arrogant blogger say... pardon me but get real, if we were all highly focused working first class graduates and we all wanted to be directors ...its not going to happen and differentials are going to stay. Did anyone get to the top by just working hard?

    This still leaves us with huge income differentials.

    Banking has to change.. get rid of short termism by banks for loans to small businesses.

    Get rid of 90 days repayment for big boys and reduce it to thirty.

    Get rid of banks getting first crack of bankruptcy debts and change it to proportionality.

    Pensions planning has to change.

    Get rid of the structure that directs people on low incomes to make provision for their pensions which we now know can be wiped out in an unregulated corporate folly that had nothing to do with them.

    Get rid of self regulation, not to do so has proved disasterous for all concerned especially pensioners!

    Get rid of profligate bonuses. If we were all payed £10000 per year the best would still float to the top. Some one would still want to be the best.

    If dividends and profits were capped business would still seek to capitalise and organisations would still seek to invest to advantage.

    There is no such thing as a free market otherwise why would we have a monopolies commission or organisations to look into insider dealing or profiteering or cartels?

    Do something positive about elder people to give them a good chance of income and relieve the state burden.

    Their good pensions would feed the comsumerism of the future. Their ability and desire to work will benefit the economy and society in general.

    Responsible journalism can play a positive role too. Responsibly using freedom of information for other than commercial ends, playing parts in timely influencing public behaviour as not to result in hystria and potential epidemics and political strife. However presently and central to much of this social strife is the banking system. Perhaps the banks should in some way subsidise state pensions to a degree so as to relieve the results of their impropriety and the resultant impoverishment and cripling credit crunch!

  • Comment number 30.

    When the tax payers took on Lloyds and Northern Rock I expected to get a share certificate for my share. Unfortunately these have not yet arrived.

    In the past, I have followed your posts because you appeared to have some grasp on the current situation that even MPs did not have.

    But this post has made me wonder. You talk of having passed the point of extreme stress, but I for one think that this point has yet to be reached.

  • Comment number 31.

    Gordon Brown should have gone long ago. Perhaps after today's election results he will now do the honourable thing.

  • Comment number 32.

    Good to know that you are not still hung up on banks Robert...I should point out that banks are not the only business in the UK and, as the BBC's business editor, perhaps you could start reporting on other businesses rather than only those you seem to have insider links to.

  • Comment number 33.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 34.

    Come on Robert, you can do better! Your blog is normally very good, please leave others at the BBC to spin the Labour message.

  • Comment number 35.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 36.

    Robert,

    Love your work - although i think you're a inchy winchy bit negative at times. none the less good work. I wanted to make a post regarding people that comment on your blog and the current government.

    I'm a Tory voter, but i actualy commend and sometimes admire the way Gordon and Alastair have acted over the past 18 months. In my limited opinion they have acted in a way that is absolutely in the best interest of the ordinary people of the UK.

    24 months ago i was no way a Gordon supporter, however in my view he has absolutely guilded... or maybe is guilding us through one of the biggest global events of our times.

    I feel the British public have absolutely no concept of what Gordon and Alastair have done for us. You get alot of so called "experts" writing comments on here - dictating what they feel will happen - but what is common in their view is that almost every single 1 of their opinions is hinsight!!!

    Idiots.

    They moan about interest rates and inflation - and how they "saw" it coming. If they "saw" it coming, why oh why didnt they invest/save so that it worked in their advantage?? 1,000's did and are reaping the rewards. Every bank has financial advisors -why not listen to them??

    In ANY stock market crash - ANY crash - There will always be people that lose money and make money. So these so called experts should have worked the system. I'm sick to death of people coming on here and moaning that they are outraged at what is happening.

    Get a grip!!! Get a Grip - recessions happen all the time, almost like clockwork and countries always come out of them!! why will this be any different???!!!

    In my opinion the current government have made every action to help the situation and i feel that in 2-3 years they will get the credit they deserve. They have made every decision in the publics interest and i hope both Gordon and Alastair get another crack at their current positions.

    I'm a Tory at heart so i dont generally agree with the policies that Labour put forward, but i feel David C and George O have very much been "i told you so" people rather than individuals that have helped the general public.

    I think over the next 6 months things will get to what the general public percieve as normal and i hope GB and AD can tell the world.... I TOLD YOU SO!!

  • Comment number 37.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 38.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 39.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 40.

    here we go again ,deals around saying buy now pay later, the same old thing starting again.all this bank rubbish and we have learnt nothing, if you cant afford it you cant have it(rule 1), joe public is still being ripped off thank you very much.We should have left the banks to go bust and start all over again,the manufacturing industry is left to the wolves but the banks get away with murder.

  • Comment number 41.

    @36 Godzi11a

    "I feel the British public have absolutely no concept of what Gordon and Alastair have done for us."

    Absolutely. There are still idiots who voted for them, in spite of the fact that Gordon and Alastair knew what was going on and did nothing about it.

    Gordon and Alistair, more than anyone else, are responsible for the economic crisis; their cosmetic actions are making it even worse.

  • Comment number 42.

    Excellent, as always, Mr Peston. Love the Tesco ref. There is a problem, though... "Every little helps"... save for the fingernails of the First Lord of The Treasury clinging onto the power precipice. Brown has done a superb job (no irony) rescuing the economy from the complete disaster which his years as Chancellor dumped it in (very ironic). But it is now time for stern confidence in the Treasury. We may be able to bank on the banks but can we continue to bank on the Bank and HMT?

  • Comment number 43.

    36 godzi11a

    You can call all idiots if you want to but there is no basis for it and I dont see what you acheive by it. As for making money out of disaster that is possible but the main aim is to avoid entrapment in negative equity or personal debt. You have no basis to assume what people have done and benefited from.

    As for - 6 months and things will get back to 'normal'. This is misguided IMO I am afraid. But you are welcome to post in 6 months time. A more likely outcome is that this is the new landscape with only muted growth to follow. Not withstanding a mere Million to go in job losses over the next 12 months or so. Not withstanding the brunt of this falling on a young generation. Not withstanding every official forecast deteriating in a matter of weeks.

    Every bank has finacial advisors. Yes of course and they are independent and not selling bank products are they.

    The problem with critising the opposition of any colour is they have not been in charge it is still Brown and co making the decisions. What decisions have been made I am afraid I regard as obvious and the same type of decisions have been made to one extent or another around the world. As we are advised by the BoE that QE intervention takes a year to impact it is too early to go patting anybody on the back. QE being moved to because the throwing of money at the black hole that is the banks has not worked as expected - As reported by the BoE.

    Appart from plugging money into a big banking hole I have yet to see any structured policy to remedy the situation, have you. The only further obvious decison is the drastic cutting of public spending in the band of 5 to 10 percent, possibly more. Why do you think the international rating agencies are looking at the sovereign rating and saying if there are no plnas to balance the books the rating may drop.

    But yes, only 183 days and things will be 'normal'. Well the new 'normal'.

  • Comment number 44.

    #36 Godzi11a. So you are a Tory voter who sees much to admire in Brown and Darling. Now why might that be? Often the obvious answer is the correct answer.

    The principal economic act of this duo is to pledge GBP hundreds of billions of taxpayers money to a set of insolvent banks - banks that they allowed to become insolvent in the first place. If you think this is such a good idea why not voluntarily give them some more of your own money. You do not need a government to act as middleman?

    Such an action is the ideal test of your expressed views - hand over your own personal cash to insolvent banks and all will see that you are a true believer. Fail to take this action and all will see that you are merely one more moaning minnie trying to presuade others to shore up the prevailing rotting structures of political and corporate governance for your own reasons.

    I´m not sure that anyone saw in advance that short term interest rates would decline to efffectively zero. They never have before, perhaps there is a reason for this lack of historical precedent.

    However you do not need any mystical powers to understand that effective interest rates for individuals are unlikley to be correlated with official interest rates. Do you think the average interest rate on credit cards is likely to be around zero? They are not. Perhaps you should take some of your own financial advice and enter the credit card business - there will be plenty of takers if you are able to offer credit cards with zero interest rates. Yet another chance for you to back your words with actions.

    Similarly you do not need mystical powers to understand that bond markets will crash as a consequence of zero official rates and QE. If you don´t believe this will happen, then that is great news as plenty of bonds are for sale, so you can buy some. Maybe you will make a fortune.

    Basically you don´t need to waste any time on impuning the views of others. All you need to do is open your wallet and back your own judgements. Because I´m a bit of an alturist I have given you a few ideas of ways of making money based on your own expressed views - so off you go and make a fortune.









  • Comment number 45.

    The reason the Government got stuck with the last rights (not an intentional pun) was because they stuck with an issue price of 170p or so when the shares were trading way below that. No-one in their right minds would have taken it up (except the Government). They should have pulled the issue and tried again at a real discount. This time they have got it right at 38p, and they will get all their money and be able to repay the preference shares.

    Had I attended the meeting yesterday I would have asked Blank and Daniels if they regarded their time at my bank as well spent given the share price on 1 May 1999 was £10. I would also have asked about what pressure might come from Europe on competition grounds. If Lloyds has to sell assets at fire sale prices it is a dead duck. If it has time to separate the bits like banking, ex building societies, insurance etc and perhaps sell some of them or float them off (leaving us where we started with Lloyds TSB) we would be in a sum of the parts scenario - always assuming the value of the parts is more than the toxic assets (the Blank/Daniels Folly Fund).

    It is almost as interesting as wondering what might happen to the Royal Blank of Scotland, soory Gordon Brown.

  • Comment number 46.

    Robert

    Again, you would make you (Labour Peer) father proud.

    The primary reason we are in so much debt is not the bank bailout, rather it is the continued inability to match borrowing and spending over the economic cycle.

    It is pure political expediency to dress the bank bailout as the only reason we are in debt. Creating civil service non-jobs in labour constiuencies is not a good use of money!

    ..And yet GB still does not apologise for wrecking the economy. This will take years to fix. The poor Tories will have a tough job cutting this back and will get no thanks from the public!

  • Comment number 47.

    Back to safe home territory of the banks I see, how about a bit more 'grass roots' postings business editor?

    For example (courtesy of Rahere)Dairy Farmers of Britain has just gone bust, taking with them the profits, such as they are, of 10% of the milk producers - and that risks driving many out of business completely.

    We can support the banks, but we can't find an equitable balance between the supermarkets and producers, we can't even feed ourselves. That's entirely the fault of Hilary Benn, who can allegedly pipe £30000 rent from the Public coffers into the Labour Party's and alledgedly charge the State for propaganda, but can't do his job right. This bankruptcy has been warned of since the start of the year, but he did nothing.

    There are two very real stories still unfolding which go largely ignored, they are:

    The continued climb in unemployment and failures in the real economy

    The inexorable rise of Swine flu infection.

    They are treated like background noise because they are neither clamorous subject or have the 'instant hard hitting newsworthy 'punch' factor. yet these are the very things that will come back to bite us.

    jericoa

  • Comment number 48.

    Mr P? HOW ABOUT A BLOG ON THE COLLAPSE OF THE WHOLESALE MILK DISTRIBUTION

    FARMERS COOPERATIVE?

    NO MILK ON THE SHELVES IS AS CRITICAL AS NO MONEY IN THE BANKS!!

  • Comment number 49.

    33 35 37 38 and 39 all removed after successfully passing initial premoderation


    5 ON THE TROT A RECORD WORTHY TO STAND FOR ALL TIME IN THE BBQUEUERS MESSAGE BOARD HALL OF FAME

    i WISH TO THANK THE tOIREGS FROM THE SUB SAHAHAHOORAH WHO MODDERATED THIS MORNING WITHOUT WHOM THE FREEDOM TO POST FOR A MOMENT WOULD NOT HAVE BEEN POSSIBLE

  • Comment number 50.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 51.

    29 Thank you for this: splendid and profoundly sad.
    47,48 Ditto - these are REAL issues

    MPs too wrapped up in expenses opportunities (most of them legal, probably ethical to a lawyer, and basically ill-advised politically). .

    What does this really indicate? Probably that most in the present government are politically impotent, don't understand this new crisis so can measure success in things materialist appertaining to self. Cosy and ultimately fatal.
    I'm probably not alone in thinking that the lack of accountability and responsibility in Parliament stems from powerlessness as much as greed. Make mistakes galore? Apologise for criminal ineptitude.
    Scandals have been many (see the interesting Stuttgart report of 2003+ which put us just above Uganda and Zimbabwe at 27th...New Zealand came out best 1st.,),
    but the really significance absence is a cadre of specialisation and wisdom rather than rhetoric and short termism. France far from perfect but saw this need even pre Napoleon.

    I can only echo previous comments on
    a) the ignorance of ICT systems (Blair an IT illiterate often filmed looking on in an informed way at a proud Primary pupil's work on VDU)
    b) the short termism of investement in industry ......yet again. (Can't we learn from c19th Germany?)
    c) the lack of inspired thinking on transforming ailing companies to the sustainable agenda (see amo0ng others Michael Moore on GM)
    d)the awful betrayal of the younger generations for whom curricular success has been measured in stupid tests rather than enterprise ability
    e) CEO greed and shareholder impotence.

    Could UKFI yet be a light in the wilderness? Leadership needed, but whence?
    Mweanwhile Brown fiddling while Rome burns.

  • Comment number 52.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 53.

    #47 and #48 There is no use crying over spilt milk. Who cares about a few farmers and their milk? Milk has nothing to do with banks. Let farms and farmers go to the wall - who needs them. People can get all the food they want from supermarkets, and a lot of supermarkets are starting to move into financial services. Also animals smell and things, there is very little chance of standing in a cowpat at your local supermarket. Unlike farmers supermarkets clearly understand customer service.

  • Comment number 54.

    BLISTERING BLUE BARNACLES IT'S ANOTHER EYEWATERINGLY POINTLESS BANKING STORY

    what is the point of this Robert? and it was so wrong in its claim that Lloyds is the first to pay back govt money that you actually had to retract part of it

    do you actually expect anyone to believe any of this hogwash about banks turning the corner?

    several large US banks are now raising money to pay back 'loans' but this is all a game of bluff, due to the failure to do the stress tests properly and fiddling with the TARP

    in the meantime poor Gordy is trying to struggle up a beach in Normandy whilst the Blairites man the machine gun nests and fill him full of holes

    methinks Robert better find out where his nearest JobCentre is...... time grows short

    anyway well done the UK on one way to really take the lead in this economic slump:

    you now have the first ZOMBIE PM TO GO WITH YOUR ZOMBIE BANKS!

    not that I want to see the useless Tories in power of course; you need to try the Somali approach

    NO GOVERNMENT AT ALL

    let's face it, can't be any worse then the current choices unless Vince Cable can battle through the middle and seize the high ground

  • Comment number 55.


    WHY don't we all just BUY Lloyds 9.75% Non Cum Irrd.Pref below par (13% yield) and be done with it?

  • Comment number 56.

    Hi Robert again,

    When you eventually look at the role of numpty regulators, the HoL criticism of the Tripartite Committee in failing in their duties etc, have a look at the primary centre of academic research on financial stability and regulation sponsored by the Bank of England. You know, the Financial Markets Group Research Centre of LSE stuffed with 100s of proffs and boffins who have been lecturing our banks and regulators on financial stability and regulations since 1987. Its website is a gold mine of nuggets on how to run a financial system and proper working banks / securitisation ad nauseam. Funded by the City , EC and god-knows who else - it makes you wonder how was it we have arrived where we are when these boffins were on the case. Chaz Goodhart and Hyun Shin lead the way headed by Proff Davey Webb. Good to know they're going to lecture us all again in July as to how to get it right next time !!

    No doubt, you've had an invite. Let us know what the answer is - cheers.

  • Comment number 57.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 58.

    I'm grateful to you Robert for bringing us this good news

    Maybe I'm missing the point here, but at this rate of repayment how long will it take this particular bank to pay back the money that it owes?

    Is that within the initial timeframe set by the government?

    How many businesses have had their rates screwed down by the banks eager to beggar their customers to ensure their own survivals?

  • Comment number 59.

    so there is a small return will it help with lowering the stealth taxes put upon the people of this country by this government i think not but it may just cover the expenses bill for the house this year.

  • Comment number 60.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 61.

    Ad. 41 - "There are still idiots who voted for them, in spite of the fact that Gordon and Alastair knew what was going on and did nothing about it.
    Gordon and Alistair, more than anyone else, are responsible for the economic crisis; their cosmetic actions are making it even worse."

    It doesn't seem to be so. The business paradigm is to earn money and when left to it's own deviceses it runs up the cul de sac ever faster. The only way to distribute the wealth to a wider circle is to pump the bubble and encourage asset acquisition accross the whole income spectrum (subprime included). As a Russian would say "It's a multimove" - which means a close to optimal solution of a checkmate problem, usually counterintuitive. So, if you think, that the only way to distribute the assets to socially impaired is to blow a bubble, than you have to have a good plan for reasonable deflation. You can't start with announcing both (this is changing the mutual knowledge into common knowledge and legitimazing contigency plans on business side, but you want them to sell as there was no tomorrow... Hence "No boom and bust" - and this forced mumbles about "fair distribution of proceedings of growth"). Now, the deflation process seems to be reasonable indeed with pretty much contained lay offs and moderate wage changes. It's unfortunate that the bill for boom years will never be payed by those, who benefited the most, but one has to take it as a nature of things.

    ps
    My private bets were on recession starting Spring 2006, pound going sharper down and much slower bank shares recovery, so, it might be that I'm wrong in all the above?

  • Comment number 62.

    labour facing meltdown, economy teetering on the brink of catastrophe, firms folding at an increasing rate, unemployment rocketing

    and what does Peston give us?

    yet another good news story

    there is a link there somewhere I just cant work out what it is

  • Comment number 63.

    If there was ever confirmation needed that we are run by a 'gentlemans club' it is the news that Andy Hornby is negotiating to be CEO of Alliance and Leicester.

    Complicity in expenses.

    Complicity in all the top jobs.

    Jobs 'for the boys' in the house of lords.

    Jobs 'for the boys' at the FSA.

    jobs 'for the boys' in quangos.

    jobs 'for the boys' within the high finance elite.

    jobs 'for the boys' in europe and high civil service positions.

    Cleaning up expenses is just the tip of the iceberg, what Gordon refuses to acknowledge is that he is part of a much bigger problem not the solution.

    Gordon and the informal but very real political, media and financial elite who via conversations at cocktail parties and mediterranean yachts in the summer during the parliamentary recess really run the country for the maintanance of their own extremely privelidged position, but to the detriment of this once great nation and its people.

    It was a great nation earnt from the a sweat and blood spent from the bottom up, not from the top down, that effort was not spent in order to create a new and much larger political, media, and financial 'super class'.

    That realisation is dawning upon the backbone middle and lower middle and working class populus from the expenses scandal, it will not stop there, how much are top BBC staff paid, who are their friends? How robust are their expenses? Are they not public servants too?

    Then let us examine all the top civil servants.


    Then let us examine the boardrooms of the banks majority owned by the people.

    The longer Gordon stays and grasps to maintain power the greater the anger and resentment will become in a time when increasing job loses and failures of small business in the real economy continue, outside the headlines of course because it is not considered 'glamorous enough to be 'real news', yet it is the most important news that affects peoples lives directly.

    Lets not even mention the unreported but very real requirement for huge cut backs in public expenditure starting early next year to avoid UK Plc going bust.

    The size of the hole at that point will be so great cut backs in front line services will be ineviatable, the civil service gravy train of 'diversity consultants' and champions of street football will be gone, the private sector will not be able to grow enough to cover that loss in national income because we have become a society that mortgaged our future to have a party now.

    The current level of generous benefits to placate the growing underclass will have to be cut back. They will not be happy about that and they will use what means they have and understand to display their unhappyness. Their anger will be amplified because it is likely we will have a conservative covernment, populated by privelidged 'toffs' at that point who will not be able to relate to or placate their plight politically.

    If I missed anything in the bigger picture summarised above or if someone can tell me how 'wildly off base I am here' and explain why I am some kind of crack pot socio economic extremist I would dearly love to hear their arguments.

    From where I am sat the above looks like the real truth of the situation we are in now and what is most likely to happen in the comming year or two.

    Oh I forgot to mention England will get to the final of the world cup in 2010 also because it will be cold in South Africa at that time...

    ok...maybe I am a crackpot!!


    Jericoa





  • Comment number 64.

    #63 got carried away should read alliance boots above!

  • Comment number 65.

    63,

    Good post, just about sums it up. Golly gosh, there's trouble ahead old chap. Stiff upper lip 'n' that, we brits love a challange :-0

  • Comment number 66.

    #63 Jericoa

    Must pick up on "generous benefits", for those that do not deserve them they are indeed rediculously generous. The 3rd generation non-contributing, ever breeding "sink" estate types, the junkie as disabled person, the "can't be bovvered" to learn to read and write, but its o.k I'll have a few babies ladies and the other assorted under humans.

    However, and I speak as someone who has never claimed benefits but do know the system and their levels, a 40 year old engineer who has worked since starting his apprenticeship, saved a deposit and funded a sensible house purchase , married and then had three children who he has supported and paid for, who is then out of work through the failure of a parent company or because his firm was a supplier to a now defunct larger concern will find to his horror that the benefits he, his wife and children are entitled to are at barest existence level.

    For him there is no hint of generosity because the idiots who believe in egalitarianism, believe that its a man, a partner and 3 children and pay him exactly the same as some skiving never usefully employed blot on society. THAT individual probably knows the system well enough to have got himself declared permanently disabled, his wife ditto due to the depression brought on by their "harrowing" self-inflicted situation and with their adapted ,refurbished free house, motability newish car and all the other frills and furbelows such can claim, will probably out "earn" the genuine recipient, whom none or very few of us would begrudge temporary support.

    So "Generous" to the undeserving, parsimonious to the righteous claimant.

    10p for the meter anyone.

  • Comment number 67.

    #63 Jericoa wrote: - Have I missed Anything ?
    "who via conversations at cocktail parties and Mediterranean yachts... really run the country..." - well they tell you about those meetings - so nothing much must be happening there - but what they do cover up is Bilderberg - now that's where it all gets decided.
    "It was a great nation earnt from the a sweat and blood spent from the bottom up, not from the top down" - bla bla bla Oh don't give me this noble peasant rubbish - bottom up - the noble English peasant rips the heads of 600 of their own unborn babies every day, sits around watching porn all day and has wife-beating as his national as sport - granted, top down, the porn is provided by the Toffs at the BBC (every beach and swimming pool in the UK has a sign saying Warning No Nudity... the proper place for nudity is on the Telly at dinner time or on the shelves in sweet shops when it can be pornographasised), and the poverty they live in is provided by the Toff controlled non-NEFS financial system they impose on us - But overall, looking at the broken heads of the babies and the broken faces of the women, I think we get the rotten government we deserve. The other fundamental thing you missed is that if I pay you 10p to make a widget and you want to buy the widget at the weekend - your 10p wages won't cover it as I want to make a profit so I'll be charging 11p - independent of how 'confident' you are. You need you get some more money from somewhere else that does not come from your wages for the economy to go round. In recent years this extra cash has come from mortgages. Now that's all gone we'll run out of numbers.

  • Comment number 68.

    @ 63.

    put very well jericoa.

  • Comment number 69.

    Is it not true that the merger of Lloyds TSB and HBOS remains subject to ratification under EU law? Could the EU still throw a spanner in the works by ordering Lloyds Banking Group to divest itself of some of its assets? What effect might such action have on the LBG shareprice?

  • Comment number 70.


    hmmm doesn't seem as well subscribed as the headline says !

    The government as a shareholder have completely taken up their chunk of the offer - so the 87% of the subscription that has been take up includes 43% that's the government..... so that means the takeup (excluding the government) was 77%.
    (44/57) = ((87-43)/(100-43))

    ....and it leaves 13% of 10 billion shares to shift on the open market before the government's underwriting kicks in = 1.3 billion shares.

    .....watch the share price slide towards the offer price of 38p over the next few days.

    currently 60p (-5p) and 300 million shares traded today...

    or am I missing something vital ???

  • Comment number 71.

    I don't know why Peston says it may take years for Lloyds share price to reach £1.15p break even price for the taxpayer stake in this company considering it broke £1.19p only a few weeks ago. Also look at Barclays, they were 60p six weeks ago. A month later they were £3 (five times). Lloyds could so easily go this way and don't forget this is a superbank and when it becomes profitable, this share will fly.

  • Comment number 72.

    So we now know where the £2.3b is coming from. The closure of all C&G branches and another tranche of job losses !!

  • Comment number 73.

    Interesting, but can't always believe what you read in the press ... If everyone had followed the media consensus not to take up the Lloyds open offer then we'd all be a lot worse off, including the tax-payer. Lloyds are going to be fine in the long run, and investors and tax-payers alike will have coined in.

  • Comment number 74.

    3. At 5:32pm on 05 Jun 2009, lord_heehaw wrote:
    "I must take issue with a couple of things you mention:...

    ... b) secondly, your assertion "we appear to be passed the moment" should, of course, be "we appear to be past the moment"

    If you are going to be correcting other peoples grammar in the future please try to actually read what you are correcting.

    I read it as "we seem to have passed the moment...", this is correct and you are wrong. cut and paste is a good way to at least quote the correct phrase, as when you quote it incorrectly your argument is on thin ice straight away.

    how terribly embarrassing. now write it out 100 times.

 

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