We're all £11bn poorer thanks to RBS and Lloyds

Cheery news for a Monday - the UK has lost £11bn on the bailout of RBS and Lloyds.

Last Updated: 31 Aug 2010

According to the UK Financial Investments report, the Lloyds stake is now worth £6.2bn less than the taxpayer paid for it, while the RBS stake is now worth £4.7bn less.

'Every  UK household will have more than £3,000 invested in shares in RBS and Lloyds,' said John Kingman, the UKFI chief executive. The best that Kingman – who is getting by on the very modest sum of £143,000 per annum -  can offer by way of encouragement is that trying to get our money back is that it’s going to be 'challenging'.

The paper losses have been run-up because RBS and Lloyds shares are currently worth so much less than the figure at which the government bought into the banks. The taxpayer shelled out for Lloyds at an average of 121p a share and RBS at 51p, but shares are trading well beneath those levels - Lloyds at 62p and RBS at 35p - making any sale before a general election virtually impossible.

These grim figures have appeared as UKFI sets out its ideas to maximise the value of its investments for the taxpayer by eventually placing the institutions back into private ownership. When this will occur is anyone’s guess. Trying to unload getting on for what we all hope might by £100 billion of bank shares will not be an easy task. So there’s unlikely to be a tax payer bonanza anytime soon, and our hard-pressed troops in Afghanistan might have to wait for some decent American style equipment for some time to come.

UKFI said it would not set any fixed timetable for ditching the shares and expected to undertake a number of capital markets transactions over a sustained period i.e drip-feed them into the market as and when it finds the appetite to buy. Let's hope they make a better fist of doing this than the sorry record of government sells offs would suggest. Practically every asset disposed of by Whitehall over the past 15 years, from DERA to the gold reserves, has been a shockingly bad deal for the taxpayer.

At least Kingman seems to realise that getting our money back this time is going to be a long-term business. 'Our investee banks face significant legacy losses and the inevitable effects of the recession. Nevertheless, we believe they now have the capital resources to weather these difficulties and to emerge from the current environment with their strong franchises and profitability intact,' UKFI said. 'The amounts involved are very large, and a successful disposal of our holdings will require professionalism and patience.' You can say that again.


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