Grim: George Osborne claimed in June that the Treasury’s original stakes in RBS, Lloyds, Northern Rock and others would yield a £14 billion profit
The Government’s profit from its bailout of the banks has been slashed by £12 billion in just seven months, thanks to the global stock market slump and a slew of fresh bad news at Royal Bank of Scotland.
Chancellor George Osborne claimed in June that the Treasury’s original stakes in RBS, Lloyds, Northern Rock and others were set to yield a £14 billion profit, according to an analysis carried out for it by investment bank Rothschild.
Calculations based on those figures show that the profit has crashed to less than £2 billion after a collapse in the share prices of RBS and Lloyds.
Rothschild’s estimate was heavily criticised at the time because it failed to take into account the £17 billion cost of financing the Government’s £107 billion injection of capital into the financial sector.
Since June, UK Financial Investments, the body that manages the Government’s stakes, has sold £6.5 billion-worth of Lloyds and RBS shares. But the Government’s remaining stakes in the two – 72 per cent of RBS and 11 per cent of Lloyds – have slumped in value and are now worth just £25.5 billion.
The banks have been hit by a wider collapse in equities, but RBS has been particularly badly affected after announcing extra costs that will wipe about £3.6 billion from 2015 profits.
The Treasury put £46 billion into RBS at 502p per share at the height of the financial crisis. The shares were changing hands for just 230p last week, the lowest level they have been since the end of 2012.
The Chancellor pulled a retail listing of the Government’s remaining stake in Lloyds last month, as predicted by The Mail on Sunday, blaming turbulence in the markets.
The Treasury said: ‘As the Chancellor has consistently said, if we want to maximize the ability of our banks to support the economy, then we should return Lloyds and RBS to the private sector. The Government has made significant progress towards this goal, and has done so in a way that has delivered value for money for taxpayers, ensuring they can expect to get back more than they were forced to put into the banks.’
Separately, Treasury Select Committee chairman Andrew Tyrie has called on the Chancellor to make sure banks cannot offset fines and other costs for past misconduct against their tax bills.
Tyrie said: ‘Banks should pay for the full cost of their misconduct. It would be wholly unacceptable if taxpayers, having bailed out the banks in 2008, were to find themselves partly responsible for paying the banks’ fines.
‘It is important to ensure that, when a UK bank reaches a settlement with a foreign regulator, any fines cannot be structured to permit UK tax deductibility.’
Last week HSBC agreed to pay $470 million (£325 million) in fines and compensation to settle a dispute with US regulators over its treatment of US homeowners during the crisis of 2007-2008.