The government has recouped the £20.3bn it ploughed into Lloyds Banking Group during the financial crisis, the chancellor has said.
Just days after admitting that the taxpayer faced multibillion-pound losses on its stake in Royal Bank of Scotland, Philip Hammond said the government had now “recovered every penny of its investment in Lloyds”.
Speaking on the sidelines of the International Monetary Fund meeting in Washington on Friday, Hammond said the government was “not in the business of owning banks” and on the brink of selling off the last of its stake.
The Treasury is able to make its claim by including £400m in dividend payments received from Lloyds as well as from selling shares in the bank. It also does not take account of the £3.6bn cost incurred to bail out out the bank, although the Office for Budget Responsibility has said it still expects the government to make £100m when fees from Lloyds are included.
The taxpayer stake stood at 43% at its peak and, according to Hammond, now stands between 1% and 2%. The City expects the remaining shares to be sold in the coming weeks. António Horta-Osório, the bank’s chief executive, said it was a “moment of huge pride for all of us at Lloyds” that the government could say it has already reclaimed its money.
Even so, it has taken much longer than expected during the financial crisis and has only been possible because Hammond was able to sanction the recent sales at a loss because of profits made from earlier transactions when the share price was higher.
The repayment has not been achieved in the way Hammond’s predecessor, George Osborne, envisaged. Osborne promised a discounted share offering to the public which had to be abandoned last year amid market turbulence. Instead, the shares have dripped out to the stock market.
Hammond said: “We are now past the point where we have recovered the taxpayers’ investment. We still hold a small shareholding of between 1-2% but the taxpayer has now recovered every penny of its investment in Lloyds.
“Recovering all of the money taxpayers injected into Lloyds marks a significant milestone in our plan to build an economy that works for everyone. While it was right to step in with support during the financial crisis, the government should not be in the business of owning banks in the long term.”
On Tuesday, Hammond admitted the Treasury had little hope of selling its 73% stake in RBS above the 502p average price per share paid during the financial crisis.
RBS shares were trading around 240p on Friday with Lloyds trading at 64p, below the 73.6p average price paid during the financial crisis.
Both banks will publish their results next week for the first three months of 2017. Lloyds has already admitted it will have to take a fresh £350m hit for the payment protection insurance mis-selling scandal – taking its total bill to more than £17bn.
