Wednesday 4 August 2010

Time to sell Lloyds to Qatari's

Yes, Lloyds Banking Group results are out today. What a turnaround they are, moving to a £1.6 billion profit at the half year. How have they done it? In short in two ways, firstly writing back some of the losses on bad debt and secondly increasing the margin on their key mortgage, banking and insurance products - plus of course a healthy slug of firing thousands of workers!

Given the terrible position LLoyds was in when it was forced to swallow HBOS whole in 2008 - a meal with enough fatal poison for anyone, this is a good news story.

Even better the shareprice of Lloyds is up to 72p this morning, a nice 15% ahead of where the Government bought in. Now is the time to start the process of getting rid of this overhang. the shareprice is not going any further north whilst everyone knows the biggest shareholder wants out. This is as good as it gets.

On top of that, next year is not so good, Lloyds has billions in open market refinancing to do which it will get away - but only at a big cost to its operating margin. This year is still one pumped by stimulants - next year won't be.

The sensible option for the Government is to get on with the disposal to a willing buyer now, whilst the sun is shining. The markets are unpredictable as is the economic environment. I have little hope though that Government is nimble enough for the task at hand.

12 comments:

PJH said...

Even better the shareprice of Lloyds is up to 72p this morning, a nice 15% ahead of where the Government bought in. Now is the time to start the process of getting rid of this overhang.

Not going to happen any time soon.

At least not until nearer the next election whereupon the current incumbents can say "look at all the money we were able to get after the last incumbents loaned them the money!!!11!!."

Too irresistible for them to play politics with it.

Steven_L said...

I still think they should sell it to me on the cheap.

And introduce that fuel duty stabliser they promised!

Liars the lots of them!

Budgie said...

"How have they [Lloyds] done it?"

By ignoring their customers and shareholders.

"Given the terrible position Lloyds was in when it was forced to swallow HBOS whole in 2008 ..."

Well true, this was the last gasp of power from the odious Brown's incompetent reign with his banker friends, but Lloyds did not really have to swallow HBoS, should not have swallowed HBoS, and must be be divested of HBoS.

Bill Quango MP said...

I predict that among the pages of the forthcoming bestseller "How I saved the Banks, the UK, the G20 and the world" by James Gordon Brown, the chapters on the banking crisis may well be very short of detail on the Lloyds takeover.

Possibly, other than the line "many banks took the opportunity to buy up their failing rivals,like HBoS" it may not be mentioned at all.

CityUnslicker said...

PJH - who is to say Lloyds will be doing as well then as now. The Government did not invest in Lloyds, it is a trading position taken out of necessity - they need to view it that way.

SL- I am building to that post for the end of the week!

Budgie - Yup, but they have righted the ship, they are not going below the waves which was definitely on the cards in 2008/9.

BQ - Or au contraire - I saved the UK by arm-locking Lloyds, what a hero I am; without it you and your children would be starving.

PJH said...

PJH - who is to say Lloyds will be doing as well then as now. The Government did not invest in Lloyds, it is a trading position taken out of necessity - they need to view it that way.

Well, quite. But when have the policies of the government ever taken the sensible path, when there's an overriding political option to counteract it?

Don't misunderstand me - I totally agree with what you're saying; I just don't think the government will.

CityUnslicker said...

PJH I know they won't as they want to wait for the outcome of their review of banking which won't report for a year. But Lloyds has not investment banking so should be excluded.

Maybe I am wrong and the shares will be £1 or more like the bank analysts predict. Not long ago they were 40p though too....

AntiCitizenOne said...

How did the banks make a profit when taxpayers are forced to lend them money for free, and banks lend it back to taxpayers at a large rate of interest?

It's a mystery to me....

CityUnslicker said...

It's a conundrum ACO. But it won't last forever, hence my point.

Steven_L said...

I think it's more pertinent to look at marketcap v balance sheet total than share price on these banks.

So much dilution and deleveraging has taken place that share price charts are irrelevant to all but the day trader.

Laban said...

Remember George Osborne, promising to break up 'too big to fail' banks, before the election ?


Now only tumbleweed blows down the deserted main street ...

Pogo said...

I agree that the Treasury should start unloading bank shares as and when it is possible to show a return for the taxpayers' forced investment. However, one hopes that they display a tad more financial acumen than our dear departed Leader did when, as Chancellor, he sold off our gold reserves and trickle them out into the market at a rate that won't destabilise the share price too unduly.

IIRC when Quatar bailed out of Barclays - very profitably for them as they'd bought in very cheap - they knocked some 25% off the price overnight. If HMG wants to play that game they have to wait until Lloyds reaches a quid or so...