UK government set to increase stake in Lloyds Bank
The UK government is set to increase its stake in Lloyds Bank from 43% to 60% with the conversion of preference shares which are attracting interest payments of 12%. This is seen as a sensible move by Lloyds Bank as it will reduce the income burden on the preference shares and transfer it to the ordinary shares which have no guaranteed dividend.
However, it is rather alarming that the UK government is slowly but surely increasing its exposure to the UK banking sector as well as introducing a variety of rescue packages. There is still no agreement on Lloyds Bank's participation in the toxic assets insurance scheme with the company hoping to transfer £250 billion of "risky assets" to the scheme. There appears to be a sticking point over the fees which Lloyds Bank is expected to pay to the government for insurance the element with suggestions that the Royal Bank of Scotland was offered a substantially lower premium than that afforded to Lloyds Bank.
Lloyds Bank shares have rebounded slightly this morning although after a substantial fall over the last few weeks there is very little for investors to celebrate. We will continue to monitor the Lloyds Bank saga and report accordingly.
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