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Lloyds bank shares slide further 'No regrets' over banks merger
(about 2 hours later)
Lloyds Banking Group shares have fallen 7% in morning trading as the bank continues to reel from Friday's announcement of massive losses at HBOS. Gordon Brown has said that he does not regret allowing the merger between Lloyds TSB and HBOS to go ahead.
Lloyds shares fell 32% on Friday after it announced expected losses of nearly £11bn for 2008 at its HBOS subsidiary. Lloyds Banking Group shares fell by 20% in early morning trading as investors continued to react to Friday's announcement of massive losses at HBOS.
The government told the BBC it was "not contemplating at the moment" putting any more money into Lloyds. The fall raised concerns that Lloyds, which is 43%-government owned, could need more funds or be nationalised.
Lloyds, which is 43%-owned by the government, has also been criticised for planning to pay bonuses to staff. But a spokesman for Mr Brown said the government is giving "no active consideration to nationalising HBOS."
Many analysts are now questioning Lloyds' decision to take over HBOS. He added that the prime minister still believed the merger was in the interests of the wider stability of the financial system.
Lloyds shares had already fallen by 32% on Friday after it announced it expected losses of nearly £11bn for 2008 at HBOS.
And after volatile Monday trading, shares fell further into negative territory after the ratings agency Moody's downgraded Lloyds' bank deposit and senior debt ratings.
Moody's cited "the high level of troubled and higher risk exposures within HBOS" which it considered would weaken the profitability of the overall group.
Further injection?Further injection?
Friday's announcement that losses at HBOS are set to be much bigger than expected has sent Lloyds shares sharply lower on concerns that the bank might need a further injection of government funds. The government has already poured £17bn into the Lloyds Banking Group.
The government has already poured £17bn into the group.
FROM THE TODAY PROGRAMME More from Today programmeFROM THE TODAY PROGRAMME More from Today programme
Some analysts believe that it may in fact need to be nationalised, like Northern Rock before it. However, some analysts are now questioning Lloyds' decision to take over HBOS, and believe that it may need to be nationalised, like Northern Rock.
But speaking to the BBC, Financial Secretary to the Treasury Stephen Timms said the government was "not contemplating at the moment" putting any more money into Lloyds. But speaking to the BBC, financial secretary to the treasury Stephen Timms said the government was "not contemplating at the moment" putting any more money into Lloyds.
"I am confident that, in the long term, this [Lloyds] is going to be a strong and successful commercial operation," he said."I am confident that, in the long term, this [Lloyds] is going to be a strong and successful commercial operation," he said.
However, he added that the government would "take whatever action is needed to secure long-term stability in the financial system".However, he added that the government would "take whatever action is needed to secure long-term stability in the financial system".
'Financial recognition''Financial recognition'
Over the weekend, it emerged that Lloyds planned to reward retail and commercial staff with bonuses reportedly worth about £120m.Over the weekend, it emerged that Lloyds planned to reward retail and commercial staff with bonuses reportedly worth about £120m.
Lloyds said its employees deserved "financial recognition" for hitting targets, but the group has been criticised by investors and politicians for rewarding failure following the government bail-out.Lloyds said its employees deserved "financial recognition" for hitting targets, but the group has been criticised by investors and politicians for rewarding failure following the government bail-out.
The government and the Tories have said executives should not receive bonuses, but staff on lower salaries should.The government and the Tories have said executives should not receive bonuses, but staff on lower salaries should.
Lloyds' five executive directors have all voluntarily agreed to forego any bonus they may be awarded for 2008.Lloyds' five executive directors have all voluntarily agreed to forego any bonus they may be awarded for 2008.
Last week, bosses and former bosses of key British banks were grilled by MPs about their role in the financial crisis.Last week, bosses and former bosses of key British banks were grilled by MPs about their role in the financial crisis.
The former heads of the two biggest UK casualties of the banking crisis - Royal Bank of Scotland and HBOS - apologised "profoundly and unreservedly" for their banks' failure.The former heads of the two biggest UK casualties of the banking crisis - Royal Bank of Scotland and HBOS - apologised "profoundly and unreservedly" for their banks' failure.