Tuesday, Apr 27, 2010
Did Broon & Co actually end up getting a bargain?
The Guardian: Lloyds Banking Group returns to profit
Shares in the banks had risen to just over 70p by last night, giving the taxpayer a [PAPER] profit of almost £2bn on its stake if the break-even price of 63.2p - which takes into account fees paid to the government - is used. Lloyds shares rose nearly 3% in early trading today to 72p.
Posted by 51ck-6-51x @ 09:41 AM (1054 views) Add Comment
15 Comments
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1. happy mondays said...
That's great news, Now put the interest rates up...
2. 51ck-6-51x said...
I'm sure they'll miss any opportunity to take profit:
They cant exactly just sell all the shares and they wont (or should I say shouldn't?) want to.
They could use their power to force the shares back into Lloyds, who may then issue debt or rights - but how likely is that, really?
£2bn paper profit; £2bn expected synergies on a merger which would not usually be allowed and £2bn is equivalent to just under a penny on income tax.
3. cyril said...
Hurrah! Taxpayers will get their money back! And it only cost them 2 years' worth of zero interest on their deposits.
4. taffee said...
bailed out...free money quantative easing and boe guarantees,asset prices propped up with interest rates at 0.5%
and the good news....lloyds to make a bit of a profit...all back to normal then
whoopy do
5. fancypants said...
So that's the market price on the 40%ish of shares that are freely tradable. What do we think the price would be if all government owned stake was dumped summarily back on the market?
6. mken said...
After injecting £200bn QE into, well, where exactly, and the special liquidity scheme and the asset protection scheme (as far as I can tell £250bn from of toxic debt from Lloyds alone) I wonder which bargain are we talking about here?
7. icarus said...
It's like Find the Lady. The money's shuffled around. You're allowed to win once in a while to keep you in the game. If you can't spot the mug it's probably you.
8. timmy t said...
Like fancypants says - the way to get our money back is to sell the shares, but doing this at a pace that doesn't cause the shares to plummet will take years. It's the same as housing - everyone feels rich when they have loads of equity, but if everyone tried to sell to realise their gains then prices would tank.
9. 51ck-6-51x said...
fancypants, timmy t,
The way to take full profit is to force the bank to take them back at full price as I postulated - this is certainly possible but as I also stated, highly unlikely. The real point to notice is that made by cyril and icarus - if we take profit now, have we /really/ taken any profit?
10. matt_the_hat said...
BTW what was the profit??
11. luckyjim said...
It's not quite the same as houses. The shares are valued at 70p because the markets believe they are worth 70p based on future income stream. If the government would only need to sell them at a small discount to shift as many as they want. Supply and demand alway play a part but if you sell five pound notes for four pounds there will always be plenty of demand.
In fact, we will see this in action if Cameron gets in. He has said he will sell off the shares to the public in a similar way to the privitisations of the eighties.
12. mountain goat said...
Great comment on a Telegraph article on this:
"Oh come on. If I was allowed to borrow near-infinite sums of money from the Bank of England at 0.25% and then lend it back to the Government at 4%+ by buying 10 Year Gilts I could make billions in profit too.
Furthermore, if I were allowed to pretend that all the trash investments on my balance sheet were still worth 100p in the pound, which is what the banks are doing following the cowardly cave-in by the Financial Accounting Standards Board to official pressure, I could avoid reality sullying my wonderful profit levels with mark-to-market writedowns.
Banks are making money because we, the taxpayer, are giving them free money to gamble with. Like the big American banks, the UK banks 'Profits' are derived mainly from proprietary trading (i.e. gambling in the markets) and NOT from the boring, but socially useful business of actually taking deposits and lending money that banks are supposed to engage in.
The whole thing is a fraud. The government wants the banks to look good, so that 'Dumb Money' investors will buy into the new share issues, which are doubtless coming.
This ultimately means that the Taxpayers' bailout money will be repaid by small investors who are largely the very same taxpayers."
13. timmy t said...
Brings a whole new meaning to the phrase "Gross Profit"
14. icarus said...
mg 12 - add:- free money not only to gamble but to make one-way bets by inflating asset prices, e.g. shares, and then counting the inflated asset prices as profit, assuming they get out before the hot money goes into the next bubble.
15. rumble said...
Same method?
http://www.foxnews.com/politics/2010/04/22/grassley-slams-gm-administration-loans-repaid-bailout-money/