All eyes on Lloyds share price as nationalisation fears grow

The Government and its financial regulator sought yesterday to calm fears about the health of Lloyds Banking Group before the start of trading in the embattled bank's shares today.

The Treasury tried to dampen talk of Lloyds being nationalised after Friday's unveiling of an £11bn loss at Halifax Bank of Scotland (HBOS), the stricken bank it bought last month in a Government-brokered deal.

Sources pointed to the Chancellor's comments at the weekend's G7 meeting that banks were "best run on a commercial basis in the private sector, properly supervised and regulated" and that "nothing has changed" in relation to ownership.

Lloyds shares lost 42 per cent last week as concern mounted about losses at HBOS, ending in a drop of almost a third on Friday to 61.4p after the bank issued its shocking trading statement.

The Financial Services Authority tried to shore up confidence in Lloyds by saying it had expected losses like those revealed on Friday when it forced banks to raise capital. Lloyds and HBOS accepted Government funds, leading to a £17bn injection and the state owning 43 per cent of the bank.

"The losses ... are not huge surprises to the FSA," Lord Turner, chairman of the watchdog, told The Andrew Marr Show. "What we did last October was run stress tests which were considerably worse than what was in the public domain to work out how big the capital subscription had to be."

The authorities want to stop panic in the equities market spreading to investors who fund Lloyds' lending – creating the "death spiral" that nearly caused HBOS and Royal Bank of Scotland to implode in October. Lloyds said yesterday there were no issues over its ability to fund. Friday's trading statement was thin on detail about how and when the losses occurred, leaving investors jittery about this year's outlook until full results are published on 27 February. The main problems are not Halifax's mortgage business but Bank of Scotland's corporate banking division, which lent aggressively to the commercial property, house building and retail sectors.

"If the outlook [for HBOS's corporate bank] is little short of catastrophic then you are looking down the barrel of nationalisation," Alex Potter, banking analyst at Collins Stewart, said.

He added that Lloyds provided some comfort by saying its core capital buffer was well over the minimum at the end of last year. But with its share price so low, if it needed £3-4bn of Government capital that would take it close to full nationalisation, he added.

Vince Cable, the Liberal Democrat Treasury spokesman, said: "What's worrying about it is that we're getting into nationalisation accidentally."

Start your day with The Independent, sign up for daily news emails
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Senior SEO Executive

£24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

Recruitment Genius: Online Customer Service Administrator

£16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...

Recruitment Genius: Digital Marketing Executive

£18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...

Day In a Page

Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before