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Will the UK government increase its stake in Lloyds bank?

Despite encouraging noises coming from the Lloyds bank boardroom, insiders have suggested that the company's hopes of escaping government majority ownership of the bank are doomed to failure. Currently the UK government owns 43% of Lloyds bank and with the company in discussions with the Treasury regarding insurance against bad debts and mortgages it seems that in return for this insurance arrangement the government will accept new shares in lieu of payment. This would then take the UK government's holding well over the 50% level and give it majority control of the operation.

Even though the Lloyds bank directors have been intimating that the company would either sell-off a large scale operation, or else try to arrange one of the largest rights issues ever seen in the UK stock market, there is doubt amongst investors. It is arguable that now is not the time to obtain the best price for either a disposal or a rights issue and we could ultimately see the UK government step in once again.

Even know the insurance scheme with the Treasury will cover up to £260 billion worth of potentially bad debts and bad mortgages held by Lloyds bank, majority ownership of the operation is a big price to pay.

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