RBS and Lloyds set to reveal losses

 

Bailed-out banks Royal Bank of Scotland and Lloyds will this week
fuel fears that it will take years for taxpayers to get their money
back.

The previous government injected £65.5 billion - more than £1,000 per citizen - to prop up the two lenders in the hope they would repay the loans with interest. But nearly four years on, the taxpayers' stake is worth just £36 billion.

The banks are set to reveal combined losses of at least £4 billion on Thursday and Friday as they bear the brunt of the eurozone debt crisis and the increased regulation being heaped on them.

The annual results will underline the scale of the struggle faced to turn around the banks, with one analyst suggesting that the Government needs to consider selling at least some of its stake at a loss.

Plans to give the shares directly to taxpayers to ease some of the public anger about the pay enjoyed by bailed-out bankers are reported to have been ditched because the investments are too shaky.

The Government injected £45.5 billion for its 82% stake in RBS but those shares are today worth around £26 billion despite a 40% rise in the share price in recent weeks.

It needs shares, which are currently trading at about 28p, to rise to 50p before it can break even.

It is a similar story at Lloyds, which benefited from a £20 billion bailout. The taxpayer needs shares to rise to 63p to get its money back but they are currently trading at around 35p, leaving the Government nursing losses of nearly £10 billion, although £2.5 billion has already been repaid.

The bank recoveries have been made more difficult because the Government has announced drastic reforms of the sector, including forcing banks to separate their retail and investment banking arms, which will cost them money to implement and hit profits.

The current malaise in the world economy and the Greek debt crisis has added to banks' woes.

RBS is expected to announce on Thursday that it has made underlying losses of £2 billion, while Lloyds is set to reveal losses of as much as £3.5 billion on Friday after compensation for mis-selling payment protection insurance is deducted.

Both banks are likely to focus on the progress they are making towards delivering a better return to the taxpayer. RBS is stripping down its investment arm Global Banking and Markets amid Government pressure to focus on the UK high street services, which will lead to 3,500 job losses on top of the 2,000 announced by the bank last summer.

Lloyds is close to selling off 632 branches, a move enforced by the EU as a condition of taking a state bailout. It has named the Co-operative Bank as a preferred bidder.

A recent note from Manus Costello, managing partner at Autonomous, says the Government should start selling its shares in RBS early.

He sees "little prospect" of RBS shares moving above 50p in the medium term and calculates that the Government is paying £500 million a year in interest payments on the money it borrowed to bail out the bank.

After RBS boss Stephen Hester was recently convinced to turn down a near-£1 million bonus, Mr Costello fears the pressure from Government to moderate pay will also damage the bank's prospects by making it hard for it to retain and attract the best staff.

He said: "The vicious row over compensation has made it clear that RBS is unlikely to be able to retain senior staff if majority Government ownership persists.

"Losing the CEO would be a major blow to the stock and therefore the Government's ability to exit its position."

PA

PROMOTED VIDEO
Life and Style
techYahoo Japan launches service to delete your files and email your relatives when you die
Life and Style
Child's play: letting young people roam outdoors directly contradicts the current climate
lifeHow much independence should children have?
Arts and Entertainment
Tycoons' text: Warren Buffett and Bill Gates both cite John Brookes' 'Business Adventures' as their favourite book
booksFind out why America's richest men are reading John Brookes
News
i100
Arts and Entertainment
<p><strong>2008</strong></p>
<p>Troubled actor Robert Downey Jr cements his comeback from drug problems by bagging the lead role in Iron Man. Two further films follow</p>
filmRobert Downey Jr named Hollywood's highest paid actor for second year running
Life and Style
Dale Bolinger arranged to meet the girl via a fetish website
life
Property
Sign here, please: Magna Carta Island
propertyYours for a cool £4m
News
ebookA unique anthology of reporting and analysis of a crucial period of history
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

Business Analyst (Agile, SDLC, software)

£45000 - £50000 Per Annum + excellent benefits: Clearwater People Solutions Lt...

Finance Manager - Bank - Leeds - £300/day

£250 - £300 per day + competitive: Orgtel: Finance Manager - Accountant - Bank...

Compliance Officer - CF10, CF11, Compliance Oversight, AML, FX

£100000 - £120000 per annum + BONUS + BENEFITS: Harrington Starr: A leading fi...

Trade Floor Support - Investment Bank - London - £350 per day

£300 - £350 per day: Harrington Starr: Our client a leading investment bank is...

Day In a Page

Some are reformed drug addicts. Some are single mums. All are on benefits. But now these so-called 'scroungers’ are fighting back

The 'scroungers’ fight back

The welfare claimants battling to alter stereotypes
Amazing video shows Nasa 'flame extinguishment experiment' in action

Fireballs in space

Amazing video shows Nasa's 'flame extinguishment experiment' in action
A Bible for billionaires

A Bible for billionaires

Find out why America's richest men are reading John Brookes
Paranoid parenting is on the rise - and our children are suffering because of it

Paranoid parenting is on the rise

And our children are suffering because of it
For sale: Island where the Magna Carta was sealed

Magna Carta Island goes on sale

Yours for a cool £4m
Phone hacking scandal special report: The slide into crime at the 'News of the World'

The hacker's tale: the slide into crime at the 'News of the World'

Glenn Mulcaire was jailed for six months for intercepting phone messages. James Hanning tells his story in a new book. This is an extract
We flinch, but there are degrees of paedophilia

We flinch, but there are degrees of paedophilia

Child abusers are not all the same, yet the idea of treating them differently in relation to the severity of their crimes has somehow become controversial
The truth about conspiracy theories is that some require considering

The truth about conspiracy theories is that some require considering

For instance, did Isis kill the Israeli teenagers to trigger a war, asks Patrick Cockburn
Alistair Carmichael: 'The UK as a whole is greater than the sum of its parts'

Alistair Carmichael: 'The UK as a whole is greater than the sum of its parts'

Meet the man who doesn't want to go down in history as the country's last Scottish Secretary
Legoland Windsor's master model-makers reveal the tricks of their trade (including how to stop the kids wrecking your Eiffel Tower)

Meet the people who play with Lego for a living

They are the master builders: Lego's crack team of model-makers, who have just glued down the last of 650,000 bricks as they recreate Paris in Windsor. Susie Mesure goes behind the scenes
The 20 best days out for the summer holidays: From Spitfires to summer ferry sailings

20 best days out for the summer holidays

From summer ferry sailings in Tyne and Wear and adventure days at Bear Grylls Survival Academy to Spitfires at the Imperial War Museum Duxford and bog-snorkelling at the World Alternative Games...
Open-air theatres: If all the world is a stage, then everyone gets in on the act

All the wood’s a stage

Open-air productions are the cue for better box-office receipts, new audiences, more interesting artistic challenges – and a picnic
Rand Paul is a Republican with an eye on the world

Rupert Cornwell: A Republican with an eye on the world

Rand Paul is laying out his presidential stall by taking on his party's disastrous record on foreign policy
Self-preservation society: Pickles are moving from the side of your plate to become the star dish

Self-preservation society

Pickles are moving from the side of your plate to become the star dish
Generation gap opens a career sinkhole

Britons live ever longer, but still society persists in glorifying youth

We are living longer but considered 'past it' younger, the reshuffle suggests. There may be trouble ahead, says DJ Taylor