Lloyds, profits and national debt

9 August 2010

Having finally broken even on their 'investment' our government could sell off its 41 per cent of Lloyds. Lloyds Banking Group could even start to pay out billions in dividends soon, if last week's positive profits of £1.6 billion continue. It's great to see that government debt can be reduced.

Long suffering shareholders are right to be miffed at the way Lloyds was rushed into acquiring HBOS at the height of the financial crisis in late 2008, without time for proper due diligence. Really Gordon Brown should never have (from a monopolies point of view) allowed such a massive UK financial institution to be formed. Though the then prime minister and Alistair Darling were desperate to avoid HBOS collapsing.

Two huge rights issues later for billions, and the improving economy, things are looking more positive.
Personally I think that we, as taxpayers, should now keep the investment for a few more years at least to benefit from the potential upside, now that conditions are improving, the shares could if all goes well double in two or three years, and if nothing else the dividends will further decrease the national debts.

RBS has further to go before it can think of significant profits, though as it is already 83 per cent owned by the government it is virtually nationalised at the moment.

Remember as 2008 has shown, shares and other financial assets can go up and down at frightening speed. Don't buy any, unless you know what you are doing and can afford to lose the money.