Taxpayers set to pocket £27bn from bank bail outs
The taxpayer stands to make up to £27bn from the emergency bailout of Britain's banks when the Government's stakes in Lloyds Banking Group and Royal Bank of Scotland (RBS) are sold, estimates suggest.
The public purse can expect to benefit from £19bn of share price gains, another £2bn in fees for guaranteeing bank bonds, plus £5bn in fees for the Asset Protection Scheme (APS) and £1bn in loan fees, according to calculations by the trade magazine The Banker.
Britain's banks revealed booming half-year financial results last month, helping to further boost their already climbing share prices. Lloyds, which is 41 per cent owned by the state, saw its profits rocket to £1.6bn from a £4bn loss the year before, while the 80 per cent-government owned RBS surged from a £3.4bn loss to a £1.4bn profit.
The return on taxpayers' equity stakes will depend on when the Coalition chooses to sell, but The Banker's estimate is based on a general stock market increase in line with nominal economic growth. "Even if you take a fairly conservative view of the share prices, the outlook is strong," said the editor Brian Caplen. "Every time Lloyds's share price goes up by 10p, the Government makes £2.76bn."
The Government also stands to cash in on less tangible assistance. The previous Labour administration offered four types of assistance to lenders in crisis: loans, share purchases, borrowing guarantees and the APS – or "insurance" against toxic debts. Together, the measures would have cost the Treasury £850bn but most were not needed. "Only" about £130bn was taken up in the form of equity and loans, yet the Government still stands to collect fees, according to Mr Caplen.
For example, Lloyds paid the Government £2.5bn in fees for the APS but quickly left the scheme after a successful capital raising in November. RBS is still paying APS fees although it is unlikely to need the fund's help. Mr Caplen added: "What the Government has done is rather clever. On every step of the way in the bailout and restructuring, it has charged the banks hefty fees for the various commitments and services provided.