Lloyds Braces For 70 Per Cent UK State Ownership Stake - Report

Tom Burroughes

6 March 2009

The implications of UK bank Lloyds’ takeover of rival HBOS will be exposed today, as the bank’s board considers a government rescue plan that could see the taxpayer take a stake of about 70 per cent in the merged bank, which includes a large private banking operation, the Financial Times reported.

Alistair Darling, UK finance minister, has agreed an outline deal that would see the government insure toxic assets of £258 billion ($368.3 billion), but it would come at a heavy price.

Mr Darling’s officials have examined the HBOS loan book and concluded that the final insurance fee charged by the taxpayer must reflect the high-risk nature of many of its investments.

After more than a week of negotiations, Mr Darling’s officials have proposed a fee that would see the government’s economic stake in the Lloyds Banking Group rise to about 70 per cent, through the issue of non-voting, but dividend-paying, B shares.

If the government were to increase its economic interest it would be a blow to the bank’s chief executive, Eric Daniels, and the chairman, Sir Victor Blank.

Earlier this week, meanwhile, Lloyds’s international private banking division, headquartered in Geneva, made a number of senior management changes, as exclusively reported by WealthBriefing yesterday. The changes are part of management adjustments following the takeover of HBOS.