Bailed-out Lloyds is back in profit

Lloyds Bank has announced it is now in a position to start repaying the taxpayer after reporting bumper profits.
Lloyds Banking Group boss Antonio Horta-OsorioLloyds Banking Group boss Antonio Horta-Osorio
Lloyds Banking Group boss Antonio Horta-Osorio

The Government had to bail out the bank in 2008 at the height of the financial crisis, with the taxpayer footing the £20.3bn bill.

Yesterday Lloyds chief executive Antonio Horta-Osorio said: “The Government now has a clear chance to give the taxpayer a profit. We’re really proud of that.”

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He added that it would be up to the Government to decide “when and how they do it”.

“We have completed the first phase,” he added.

“The share price is now in a position where the Government can return taxpayers’ money at a profit.”

Lloyds’ shares jumped eight per cent to 74p yesterday, well above the 61p that the Government regards as break-even on its bailout.

The Prime Minister David Cameron is keen to show that the UK’s bailed out banks are on the road to recovery and to reward the taxpayer with a profit on an investment that most were unhappy to make.

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A profitable sale of part of the state’s 39 per cent stake in Lloyds would enable Mr Cameron to claim that the taxpayer won’t be left out of pocket from the bailout.

Royal Bank of Scotland, the other bank the Government bailed out with billions of pounds of taxpayers’ money during the 2008 financial crisis, is still struggling to recover.

Analysts expect the Government to sell blocks of shares with institutional investors.

It is expected to sell around a quarter of the £20bn loan either this month or in September.

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The Government reiterated that it has no set timetable or target price for starting the sale of its 39 per cent stake.

A spokesman for the Treasury said: “The Government has set out its plan to take Britain’s banking system from rescue to recovery.

“As part of this, we have said that we are now actively considering options for sales of the taxpayer’s shares in Lloyds.

“We have also consistently said we have no set timetable or target share price for beginning the return of Lloyds to the private sector, and ensuring value for money for the taxpayer will continue to be the overriding consideration for any sale.”

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Lloyds said its recovery is ahead of plan as it swung out of the red with half-year profits of £2.1bn in a turnaround on losses of £456m a year earlier.

The improvement followed further cost cuts and a 43 per cent reduction in bad debts to £1.8bn in the six months to June 30.

Lloyds is the best-performing banking stock in Europe, having more than doubled in value over the past 12 months.

However its outperformance was overshadowed by the 
news that the bank has had to set aside another £450m to 
cover compensation for PPI mis-selling, bringing its total bill to £7.3bn.

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The cost of the PPI mis-selling scandal is now more than double that of the Olympic Games.

Consumer group Which? said a “staggering” £18.4bn has now been set aside across the industry to tackle the ongoing surge in PPI complaints, eclipsing the £8.9bn cost of the Olympics.

Mr Horta-Osorio said the bank is working to “ensure our customers’ complaints are addressed efficiently and fairly”.

Which? executive director Richard Lloyd said: “It is staggering that the cost of the PPI mis-selling scandal now stands at more than double the cost of the Olympic Games.”

Lloyds said 81 per cent of complaints it receives are about PPI, down from 86 per cent in the second half of last year.