THE taxpayer has moved out of the red on stakes in Royal Bank of Scotland and Lloyds Banking Group after shares in the part-nationalised banks hit six-month highs.
The Government paid £45.2 billion for an 84% stake in RBS at an average cost of 49.9p a share, but the stock is hovering just below the 50p break-even mark after positive comments from banking analysts in recent days.
Shares in RBS have also been helped by reports that it could sue US investment bank Goldman Sachs after being hit with £550 million in losses due to alleged fraud.
Lloyds Banking Group, in which the taxpayer has a 41% stake, is meanwhile trading nearly 2p above the 63.2p entry price for the Government’s £27.6 billion investment, giving the public sector a notional paper profit of more than £500 million.
The taxpayer gains just over £900 million for every penny which shares in RBS move above 49.9p, while every 1p above 63.2p adds around £280 million to the value of the public stakes.
In March, Lloyds said it expected a return to profit this year after a better than feared recent performance on bad debts.
Documents published alongside the Budget put the current market cost of the Government’s financial sector bail-outs at around £6 billion, an improvement on the £10 billion estimated in December’s Pre-Budget Report.
The final outcome will depend on the eventual sale price of the share stakes as well as net payouts under the Asset Protection Scheme, which insures RBS toxic assets.
The Asset Protection Agency currently estimates that the taxpayer should eventually reap a £5 billion benefit from the scheme.