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New banking group to be half owned by taxpayer

Taxpayers are set to own almost half of the “super-bank” created from Lloyds TSB’s rescue takeover of HBOS, the two banks confirmed today.

The offer of £13bn in new shares from the duo to strengthen their finances was all but snubbed by existing investors - leaving the Treasury to buy them up.

This will leave the taxpayer owning around 43.4% of the new Lloyds Banking Group, which is due to gain court approval in Edinburgh today and begin trading next week.

The share offerings by the pair were spurned because the price of the new shares had fallen well below the level at which they are currently trading.

HBOS said just 0.24% of the 7.5bn shares it offered to raise £8.5bn were taken up. Lloyds TSB saw just 0.5% of its 2.6bn new shares to raise £4.5bn bought by existing investors.

Based on Friday’s closing prices, the taxpayer is sitting on combined losses of around £3.5bn on its stakes in both companies.

Lloyds TSB chief executive Eric Daniels said: “We are pleased that the capital-raising process has completed and that the new, combined group will have a strong financial position. We understand that many existing shareholders did not participate because of the divergence between the offer price and the current market price.”

The Government has also invested a further £4bn in the two banks in return for preference shares. These come with conditions such as a ban on bonuses while they are still held by the Treasury.

This was posted in Bdaily's Members' News section by Ruth Mitchell .