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

PROMOTED VIDEO
Arts and Entertainment
Joel Edgerton, John Turturro and Christian Bale in Exodus: Gods and Kings
film Ridley Scott reveals truth behind casting decisions of Exodus
News
Andy Murray with his girlfriend of nine years, Kim Sears who he has got engaged to
peopleWimbledon champion announces engagement to girlfriend Kim Sears
Arts and Entertainment
Jake Quickenden and Edwina Currie are joining the I'm A Celebrity...Get Me Out Of Here! camp
tv
Arts and Entertainment
Roisin, James and Sanjay in the boardroom
tvReview: This week's failing project manager had to go
Life and Style
Fright night: the board game dates back to at least 1890
life
Life and Style
fashion
News
ebooksNow available in paperback
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

Langley James : IT Support; Helpdesk, VMware; Manchester, £18k

£16000 - £18000 per annum: Langley James : IT Support; Helpdesk, VMware; Manch...

h2 Recruit Ltd: Business Development Manager - HRO - £70k+ ote

£35000 - £450000 per annum + £3k car, £70k ote: h2 Recruit Ltd: Do you want to...

Citifocus Ltd: Newly Qualified Accountants - Risk Mgmt

£Attractive Package: Citifocus Ltd: Prestigious financial institution seeks to...

Citifocus Ltd: Operational Risk Analyst

£Negotiable: Citifocus Ltd: Experienced operational risk professional with ban...

Day In a Page

Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

It's in all our interests to look after servicemen and women who fall on hard times, say party leaders
Millionaire Sol Campbell wades into wealthy backlash against Labour's mansion tax

Sol Campbell cries foul at Labour's mansion tax

The former England defender joins Myleene Klass, Griff Rhys Jones and Melvyn Bragg in criticising proposals
Nicolas Sarkozy returns: The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?

Sarkozy returns

The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?
Is the criticism of Ed Miliband a coded form of anti-Semitism?

Is the criticism of Miliband anti-Semitic?

Attacks on the Labour leader have coalesced around a sense that he is different, weird, a man apart. But is the criticism more sinister?
Ouija boards are the must-have gift this Christmas, fuelled by a schlock horror film

Ouija boards are the must-have festive gift

Simon Usborne explores the appeal - and mysteries - of a century-old parlour game
There's a Good Girl exhibition: How female creatives are changing the way women are portrayed in advertising

In pictures: There's a Good Girl exhibition

The new exhibition reveals how female creatives are changing the way women are portrayed in advertising
UK firm Biscuiteers is giving cookies a makeover - from advent calendars to doll's houses

UK firm Biscuiteers is giving cookies a makeover

It worked with cupcakes, doughnuts and macarons so no wonder someone decided to revamp the humble biscuit
Can SkySaga capture the Minecraft magic?

Can SkySaga capture the Minecraft magic?

It's no surprise that the building game born in Sweden in 2009 and now played by millions, has imitators keen to construct their own mega money-spinner
The King's School is way ahead of the pack when it comes to using the latest classroom technology

Staying connected: The King's School

The school in Cambridgeshire is ahead of the pack when it comes to using the latest classroom technology. Richard Garner discovers how teachers and pupils stay connected
Christmas 2014: 23 best women's perfumes

Festively fragrant: the best women's perfumes

Give a loved one a luxe fragrance this year or treat yourself to a sensual pick-me-up
Homeless Veterans Christmas Appeal: Drifting and forgotten - turning lives around for ex-soldiers

Homeless Veterans Christmas Appeal: Turning lives around for ex-soldiers

Our partner charities help veterans on the brink – and get them back on their feet
Putin’s far-right ambition: Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU

Putin’s far-right ambition

Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU
Tove Jansson's Moominland: What was the inspiration for Finland's most famous family?

Escape to Moominland

What was the inspiration for Finland's most famous family?
Nightclubbing with Richard Young: The story behind his latest book of celebrity photographs

24-Hour party person

Photographer Richard Young has been snapping celebrities at play for 40 years. As his latest book is released, he reveals that it wasn’t all fun and games
Michelle Obama's school dinners: America’s children have a message for the First Lady

A taste for rebellion

US children have started an online protest against Michelle Obama’s drive for healthy school meals by posting photos of their lunches