Taxpayers were nursing almost £8bn in paper losses yesterday as shares in the trio of UK banks bailed out with public funds took their latest tumble.
HBOS, Lloyds TSB and Royal Bank of Scotland were the worst performers on another difficult day for the FTSE 100 Index.
All three banks are offering new shares under the Government’s £37bn recapitalisation plans, with the Treasury set to buy any not taken up by investors.
But shares in the trio are trading well below the price being offered at the beginning of October — meaning the taxpayer is likely to have to pick up the tab as shareholders snub them.
The darkening prospects for the global economy as well as gloomy surveys predicting a deep recession ahead from business groups over the weekend have combined to depress the banks’ share prices.
HBOS’s shares were also hit as a Scottish financier abandoned plans to broker an alternative to the ailing bank’s planned tie-up with Lloyds TSB.
"It’s extraordinary that in just over two months, the value of these bank shares could have fallen so catastrophically as they have," BGC Partners’ David Buik said.
On paper, the taxpayer is currently losing around £4.3bn on its prospective stake in RBS, £2.9 bn on HBOS and around £650m in Lloyds.
But this is before the £9bn in preference shares — the priority shares held by the Government in return for funds that come with conditions such as a ban on dividends — are taken into account.
Lloyds TSB shareholders will have their chance to vote on the bank’s takeover of HBOS and its Government-backed fundraising plans tomorrow.
RBS follows the Lloyds meeting on Thursday with its own vote on whether the group’s capital raising plans should go ahead.
On Friday, HBOS chairman Dennis Stevenson said the bank could have to be nationalised if shareholders reject the takeover.