Taxpayers nursing £32bn loss on Lloyds

Graham_Devon

Far from making a profit for us. The taxpayer is nursing a £32bn loss.

Our stake was supposed to be sold off by now...and at a profit. But it seems were just losing more.

There has been some quite vocal cheer before now about how successful the bank bailouts were. Trouble was, we didn't actually sell the shares. So now we are nursing our losses again.

When taxpayers bailed out Lloyds Banking Group – which was two separate banks Lloyds TSB and HBOS at the time – and Royal Bank of Scotland and the expectation was that the government stake would have begun to be sold off by now. And at a profit.

Instead, three years later, the taxpayer is nursing a loss of close to £32bn on stakes originally worth more than £60bn. The meltdown in the financial markets and the impact of the report by the independent commission on banking to "ringfence" high street banks is being blamed for the fall in the share prices.

The terms of the bailout were announced on 13 October 2008 although the taxpayer eventually ended up buying its stake in RBS in three tranches – and spending more than first envisaged. The first tranche, of 22.8bn shares was bought in December 2008 at a price of 65.5p; the second was a preference share conversion in April 2009 when 16.7bn shares were bought at 31.75p and then a further slice in December 2009 of 51bn shares at a price of 50p when the asset protection scheme (APS), designed to insure its most toxic assets, was eventually set up. UK Financial Investments, set up in November 2008 to act as an "arms length" investor in the stakes in the bailed out banks, reckons this gives an average price of 50.2p share – plotted on the graph – for 90.6bn shares that were worth £45.5m at that price.

http://www.guardian.co.uk/business/blog/2011/oct/13/taxpayer-losses-rbs-lloyds-shares

What does Hamish have to say now? Apparently the "doomers" had been totally humiliated by suggesting there wouldn't be any profit!
http://forums.moneysavingexpert.com/showpost.php?p=32238575&postcount=5

wotsthat

That's quite quite a dry article - it reports the figures and the background but no-one suggests what happens from here.

As it's a small fraction of the UK debt and the loss hasn't been crystallised it seems that the best course of action is to hold the shares and hope the prices recover. Don't forget that a labour government purchased these shares so even if the prices fall further Dave's got a ready scapegoat for years to come.

MacMickster

We need to turn our stake in these "nationalised" banks to our advantage by exercising control over them and running them in the national interest.

Support start-up businesses and SMEs looking to expand, thus creating jobs.

Replace savings accounts with investment accounts, where depositors returns are linked to the success of the banks' future investment strategies.

shortchanged_2

Don't worry about is graham. As long as the board of directors get their bonuses that's the main thing. I would hate to see these fellas impoverished.

the_flying_pig

we can be like Sibley & his house.

who cares what the silly 'market' says - we paid £60bn and will not sell for one penny less than this, the shares' true worth. why on earth would we sell on the cheap?

wotsthat

the_flying_pig wrote: »

we can be like Sibley & his house.

who cares what the silly 'market' says - we paid £60bn and will not sell for one penny less than this, the shares' true worth. why on earth would we sell on the cheap?

Why should the government sell at a loss? They aren't a forced seller.

StevieJ

wotsthat wrote: »

That's quite quite a dry article - it reports the figures and the background but no-one suggests what happens from here.

As it's a small fraction of the UK debt and the loss hasn't been crystallised it seems that the best course of action is to hold the shares and hope the prices recover. Don't forget that a labour government purchased these shares so even if the prices fall further Dave's got a ready scapegoat for years to come.

Not so simple, maybe Labour purchased those shares but they weren't the instigators of that report

The meltdown in the financial markets and the impact of the report by the independent commission on banking to "ringfence" high street banks is being blamed for the fall in the share prices.

Thrugelmir

StevieJ wrote: »

Not so simple, maybe Labour purchased those shares but they weren't the instigators of that report

The underlying value of the banks once restructuring is complete is still open to debate. As both will reduce in asset base to a fraction of their boom year peaks. Alas also will overall profitability.

the_flying_pig

wotsthat wrote: »

Why should the government sell at a loss? They aren't a forced seller.

if I buy [say] a cup of your bodily fluids from you for £60bn, does the fact that I'm not a "forced seller" [i.e. am solvent] alter the fact that I've been sold a pup?

the fact that 1000 years or so of inflation at 3% or so may mean that the cup alone will be worth £60bn one day will be kind of a cold crumb of comfort to me.

michaels

Funny how although the problem originated in the US, the US Govt managed to get paid bank by its banks and sell its stakes for a profit.

Also worth remembering that it is supporting the banks rather than the recession that has brought the Irish debt to crisis levels, before the crisis their debt to GDP ratio was much lower than the UK and their deficits have been no worse - and don't forget how big our banking sector is relative to GDP...

HAMISH_MCTAVISH

Graham_Devon wrote: »

Far from making a profit for us. The taxpayer is nursing a £32bn loss.

So?

The investment is at a fixed cost. The timeline to sell is infinite.;)

Now I know your investment experience is a bit hazy, what with losing all that money on AIM shares and all, but do you think someone like Warren Buffet hits the panic button every time shares dip below what he paid for them, or breaks out the bubbly every day they rise higher than what he pays for them?

No. Of course not. Such a mentality is for day-traders and boiler room hustlers.

Buffet sits on the shares for decades and realises long term value from them. And Buffet, probably the worlds best investor, bought 5 Billion dollars of Bank of America shares a few months ago. The share price then was almost $7.00. Today it's significantly lower. In the future it will almost certainly be significantly higher.

The UK taxpayer should be no more worried about it's investment in Lloyds than Buffet should be about his investment in BOA.