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| Lloyds likely to repay taxpayers | |
| (10 minutes later) | |
| Taxpayers are likely to benefit as shareholders in Lloyds Banking Group supported a new rights issue. | |
| Shareholders have given strong support to a rights issue - buying 87% of new shares that were offered. | |
| The £4bn share offer had been underwritten by the Treasury, meaning that any shares not taken up would be bought by the government. | The £4bn share offer had been underwritten by the Treasury, meaning that any shares not taken up would be bought by the government. |
| That would have increased the stake in the bank owned by UK taxpayers from 43% to about 65%. | That would have increased the stake in the bank owned by UK taxpayers from 43% to about 65%. |
| Analysts said that appetite was strong because the stock was on sale at well below the current market price. | Analysts said that appetite was strong because the stock was on sale at well below the current market price. |
| But the government said it was a sign of growing faith in the banking sector. | But the government said it was a sign of growing faith in the banking sector. |
| Loss expected | Loss expected |
| Lloyds was raising the cash to replace £4bn in government-owned preference shares with ordinary shares. | Lloyds was raising the cash to replace £4bn in government-owned preference shares with ordinary shares. |
| It wants to pay off those preference shares - issued during last autumn's financial crisis - because they cost it £480m in dividend payments every year. | It wants to pay off those preference shares - issued during last autumn's financial crisis - because they cost it £480m in dividend payments every year. |
| In January, Lloyds completed its takeover of Halifax Bank of Scotland (HBOS) | In January, Lloyds completed its takeover of Halifax Bank of Scotland (HBOS) |
| The government backed the deal, bypassing normal competition rules to avoid the collapse of the Halifax owner. | The government backed the deal, bypassing normal competition rules to avoid the collapse of the Halifax owner. |
| But HBOS losses were far heavier than Lloyds realised, making the deal less attractive than it first appeared, with the group expected to plunge into the red this year. | But HBOS losses were far heavier than Lloyds realised, making the deal less attractive than it first appeared, with the group expected to plunge into the red this year. |
| The takeover was branded "a disaster" at Lloyds' annual meeting in Glasgow on Friday and chairman Sir Victor Blank is to stand down. | The takeover was branded "a disaster" at Lloyds' annual meeting in Glasgow on Friday and chairman Sir Victor Blank is to stand down. |
| 'Real progress' | 'Real progress' |
| Under the terms of the rights issue deal, the 13% of shares that were unsold will be made available on the open market - with any profits above the 38.43p offer price split among investors who did not take part in the fundraising. | Under the terms of the rights issue deal, the 13% of shares that were unsold will be made available on the open market - with any profits above the 38.43p offer price split among investors who did not take part in the fundraising. |
| Any shares not sold at this point will be bought up by the Treasury, and added to the taxpayer stake in Lloyds. | Any shares not sold at this point will be bought up by the Treasury, and added to the taxpayer stake in Lloyds. |
| Observers said that while the price of shares was about half that of the current market value, the investor support would be welcomed given the challenges facing the bank. | Observers said that while the price of shares was about half that of the current market value, the investor support would be welcomed given the challenges facing the bank. |
| City Minister Lord Myners welcomed the take-up as "very real progress" saying it was "extremely difficult" to imagine raising such equity three months ago. | City Minister Lord Myners welcomed the take-up as "very real progress" saying it was "extremely difficult" to imagine raising such equity three months ago. |
| "I think we have now moved into a new territory in which institutional investors are saying 'We now have confidence in UK banks, their capital is strong and they are clearly again lending and supporting the UK economy'", he told the BBC. | "I think we have now moved into a new territory in which institutional investors are saying 'We now have confidence in UK banks, their capital is strong and they are clearly again lending and supporting the UK economy'", he told the BBC. |
| "I think there is still a great deal to be done. The world economy is still in a very nervous condition, but there are some signs in areas traditionally regarded as leading indicators that the underlying economy is moving to a position where improvement can be envisaged." | "I think there is still a great deal to be done. The world economy is still in a very nervous condition, but there are some signs in areas traditionally regarded as leading indicators that the underlying economy is moving to a position where improvement can be envisaged." |