Bailed out banks’ sale waits for ‘more certainty’

UK Financial Investments (UKFI), which manages the Government’s 41 per cent stake in Lloyds and 83 per cent holding in RBS, said in its annual report yesterday it would increasingly focus on how to sell the investments as part of the largest ever privatisation programme in the UK.

But it added that greater regulatory certainty was needed to create a stable trading environment and allow the City to put a value on the businesses.

An initial report by the Independent Commission on Banking proposed forcing them to ring-fence funds in their retail arms but the exact details will not be known until the full report on September 12.

UKFI’s shares in both banks slipped by seven per cent over the financial year to March 31 but have fallen much further in the weeks since then.

Lloyds shares have been trading around 43p but need to rise to 63.1p, or by 46 per cent, for the Government to get back the money it invested. RBS shares have slumped to 33.5p and need to rise by 49 per cent to 49.9p for the taxpayer to break even.

The weakness in the share price reflects the “ongoing uncertainty about the banks’ recovery prospects” partly as a result of the threat of increased regulation and the eurozone debt crisis.

The latest round of reforms are expected to strengthen the stability of the banking sector, but will affect the banks’ future profitability and share price, said UKFI.

It is also preparing to sell part of Northern Rock after Chancellor George Osborne put it up for sale last month.