The only thing keeping Lloyds Banking Group alive is central-bank aid, writes London Times business editor John Waples.
“The last time I wrote about Lloyds (Britain’s largest mortgage lender), a shareholder said he was reporting me to the Financial Services Authority. He said I was trying to sabotage the share price and wanted me in jail,” Waples reports.
“Oh dear, he is going to be annoyed again. The bald truth about Lloyds is that even after its 13.5 billion pound ($22.3 billion) rights issue, it is still a bust business if taxpayer support is removed.”
Shareholders of the bank, which is 43 percent owned by the government, just approved the rights issue to avoid asking the Bank of England for even more assistance.
Some of Lloyds’ woes stem from buying troubled mortgage lender HBOS last year.
BOE Gov. Meryvn King has revealed that the central bank was supporting HBOS with a covert 25 billion pound loan while Lloyds was buying it.
“What he failed to say was that the Bank is still providing loans, possibly as high as 100 billion pounds, and without it, Lloyds cannot exist,” Waples writes.
“The way Lloyds has treated investors is little short of contemptuous.”
Concern about British banks has intensified in the wake of Dubai World’s attempt to delay debt payments “U.K. banks are potentially the most impacted by broad repercussions of Dubai’s debt restructuring,” Morgan Stanley analysts wrote to clients.
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