Hopes of pay-back time for taxpayers as Lloyds shares pass break-even price

Chancellor may soon start to recoup £20bn spent rescuing lender

John Collingridge

Lloyds Banking Group shares were today trading above the Government's break-even price, fuelling speculation that taxpayers will soon start to recoup the more than £20 billion spent rescuing the lender.

Shares in the 39-per-cent-state-owned bank today rose above the 61.2p level at which the Government said it would break even on its 2008 bailout, and are now at their highest point for two years.

The Treasury is widely expected to begin selling its stakes in Lloyds and 81 per cent nationalised Royal Bank of Scotland before the 2015 general election. Prime Minister David Cameron recently raised the prospect of selling RBS shares at a loss.

Shares in Lloyds have more than doubled over the past year, boosted by state stimulus for the banking sector, the recovering economy and housing market, and its improving balance sheet.

Lloyds chief executive Antonio Horta-Osorio yesterday told shareholders at its annual meeting: "We expect us to return to profitability this year and to grow our core business, to realise our full potential to deliver strong, stable and sustainable returns for you, the shareholders, and to allow UK taxpayers' investment in the group to be repaid."

Mr Horta-Osorio's £1.5 million shares bonus for 2012 is tied to the 61p break-even level. It will vest after five years if the state has sold at least a third of its stake at prices above 61p, or if a share price of 73.6p has been reached.

However, the 61p price has been described as "contrived" by banking analyst Ian Gordon at Investec Securities, who argues it "conveniently ignores its average in-price of 73.6p".

The state ploughed more than £20 billion into Lloyds at the height of the credit crunch after the then Labour government brokered its rescue of Halifax Bank of Scotland.

Lloyds remained in the red in 2012 with pre-tax losses of £570 million after setting aside £3.6 billion to compensate customers who were mis-sold payment protection insurance (PPI).

But its first quarter underlying profits surged to £1.5 billion, with bad debts plunging by 40 per cent.

Lloyds chairman Sir Win Bischoff recently announced he is standing down and hailed "significant progress" in the bank's recovery.

UK Financial Investments, which manages the state's bank holdings, declined to comment.

Lloyds’ share price has more than doubled in the past 12 months as the prospects for the bank have brightened. But analysts predicted it will need to stay above the 62p level for a longer period before the government decides to act.

Mike van Dulken, the head of research at Accendo Markets, said: “The big question now is to what extent the Government makes the most of existing momentum and leaves the shares run to try to profit from the situation. It’s a big trade-off between returning the shares to the markets as quickly as possible (well before the 2015 election), and taking the opportunity to make up for some of the costs taxpayers incurred via forced bailouts.”

Fellow state owned bank RBS also advanced today, and added 6.8p to 325.6p, but it is still below the average price paid by government of 502p.

PA

Start your day with The Independent, sign up for daily news emails
Sport
sportSo, how closely were you paying attention during 2014?
Arts and Entertainment
Dennis speaks to his French teacher
tvThe Boy in the Dress, TV review
News
One father who couldn't get One Direction tickets for his daughters phoned in a fake bomb threat and served eight months in a federal prison
people... (and one very unlucky giraffe)
Arts and Entertainment
Joel Edgerton, John Turturro and Christian Bale in Exodus: Gods and Kings
film
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
News
i100
Arts and Entertainment
The Plaza Theatre in Atlanta, Georgia was one of the 300 US cinemas screening
filmTim Walker settles down to watch the controversial gross-out satire
Arts and Entertainment
Amy Adams and Christoph Waltz in Tim Burton's Big Eyes
film reviewThis is Tim Burton’s most intimate and subtle film for a decade
Life and Style
Mark's crab tarts are just the right size
food + drinkMark Hix cooks up some snacks that pack a punch
Arts and Entertainment
Jack O'Connell stars as Louis Zamperini in Angelina Jolie's Unbroken
film review... even if Jack O'Connell is excellent
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

Selby Jennings: Quantitative Research | Equity | New York

Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...

Selby Jennings: SVP Model Validation

Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

The Jenrick Group: Night Shift Operations Manager

£43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

Day In a Page

Aren’t you glad you didn’t say that? The worst wince-and-look-away quotes of the year

Aren’t you glad you didn’t say that?

The worst wince-and-look-away quotes of the year
Hollande's vanity project is on a high-speed track to the middle of nowhere

Vanity project on a high-speed track to nowhere

France’s TGV network has become mired in controversy
Sports Quiz of the Year

Sports Quiz of the Year

So, how closely were you paying attention during 2014?
Alexander Armstrong on insulting Mary Berry, his love of 'Bargain Hunt', and life as a llama farmer

Alexander Armstrong on insulting Mary Berry and his love of 'Bargain Hunt'

From Armstrong and Miller to Pointless
Sanchez helps Gunners hold on after Giroud's moment of madness

Sanchez helps Gunners hold on

Olivier Giroud's moment of madness nearly costs them
A Christmas without hope: Fears grow in Gaza that the conflict with Israel will soon reignite

Christmas without hope

Gaza fears grow that conflict with Israel will soon reignite
After 150 years, you can finally visit the grisliest museum in the country

The 'Black Museum'

After 150 years, you can finally visit Britain's grisliest museum
No ho-ho-hos with Nick Frost's badass Santa

No ho-ho-hos with Nick Frost's badass Santa

Doctor Who Christmas Special TV review
Chilly Christmas: Swimmers take festive dip for charity

Chilly Christmas

Swimmers dive into freezing British waters for charity
Veterans' hostel 'overwhelmed by kindness' for festive dinner

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect