Taxpayers hit harder as bank shares nosedive

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The Independent Online

The losses faced by taxpayers on the part-nationalised banks have widened to £26 billion, it was reported today.

The figure is considerably higher than the £18 billion hit the National Audit Office calculated the taxpayer was nursing on Royal Bank of Scotland and Lloyds Banking Group shares on 27 November, according to the Guardian.

The increase has been driven by the dire performance of the banks' shares during 2009, with RBS the worst performing company in the FTSE 100, while Lloyds Banking Group was the sixth worst performer.

RBS, in which the Government now holds a stake of around 84 per cent, accounts for the majority of the loss after the shares lost 40 per cent of their value during the year.

The group's shares ended 2009 at just 29.2p, well below the 50p level needed for the Government to break even.

Shares in Lloyds did not do much better, closing the year at 50.69p, well down on the 74p which the National Audit Office believes was the average "buy in" price paid by the Government for its 43 per cent holding.

Overall, the taxpayer is currently nursing a £20 billion loss on the RBS shares and a £6 billion one on its holding in Lloyds Banking Group.

But the situation could be worse, with RBS shares sinking to a low of just 10p at one point in 2009, while Lloyds has also endured a volatile year.

However, there was also a brief period during the autumn when the taxpayer had made a nominal profit, after RBS shares rose to 58p and Lloyds' touched 111.3p.

The National Audit Office has calculated that every 10p rise in RBS shares translates into a £9 billion gain for the taxpayer, while a 10p move in Lloyds ones increases the value of the taxpayers' stake by £3 billion, the Guardian said.

The National Audit Office has previously said the Government was right to bail out the banks, because it was difficult to imagine the consequences for the economy and society if a major institution had collapsed.

But it added it remained to be seen how much the bailout would cost the taxpayer.

A Treasury spokesman said: "The Government will sell its shares in the banks at a time that ensures the best possible return for taxpayers.

"We estimate that any eventual losses to the taxpayer from overall support for the banking system will be less than £10 billion."