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UK government in profit on banking stakes

The UK government today stands with a profit of around £3.4 billion on investment stakes in Royal Bank of Scotland and Lloyds bank. After reporting profits of around £1.6 billion the Lloyds bank share price has increased to 74p giving the UK government a net gain of £3.17 billion on its initial £17 billion investment. As we await Friday's figures from Royal Bank of Scotland the government currently stands at a profit of £119 million on its £45 billion investment.

There are high hopes that UK taxpayers could eventually exit the two companies with a significant profit although there are other issues to take into consideration, such as the quantitative easing program and investment into the UK money markets. When you also take into account the financing costs of these massive investments into the UK banking arena the situation in reality may be very different to that on paper.

However, when you consider the share price of Royal Bank of Scotland and Lloyds bank at the depths of the UK recession then perhaps the turnaround today should be welcomed. Quite how the UK banking sector will perform in the short to medium term, with UK budget cuts to come in, remains to be seen.

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