£7.8bn state bank loss - OBR

The buy-up of RBS and Lloyds looks an increasingly grim deal for the UK taxpayer. The Office for Budget Responsibility (OBR) says the government's stake in both banks are now worth £30bn less than originally paid.

Which means that the government needs to flog both for an £8bn profit if it is to recoup the total bail-out cost - and that's a long way off.

Too much state love

The extra costs in financing the funds to support the rescues of not just RBS and Lloyds but also Northern Rock, three years on, "have amounted to £12.8 billion to date,"' the OBR says.
The government had thought it would make £5bn from RBS's Asset Protection Scheme - this insures banks against losses on risky assets for a fee - but that figure now appears discredited.

So Lloyds and RBS look set to remain pariahs of the banking sector. It wasn't so long ago that Nick Clegg was musing about the possibility of free shares to all from RBS and Lloyds - up to £1,000 per head of the population, he suggested.

Few profits

Clegg made the noises earlier in the summer when Lloyds was trading at around 50p a share (now 24p) and RBS 12p a share (now 6.7p). So the government remains even further away from giving UK taxpayers a cash-back. Or the chance for much of the UK population to personally chase bank bosses for paying themselves such vast salaries.

Recently Lloyds and RBS both warned they expected to meet profits targets for the next three years. UK growth remains too sluggish and consumers are too worried about taking on more debt concerns to look for more (sensible ones, at least, though there are increasing worries about consumers borrowing more to 'sustain lifestyle choices' despite the recession).

A long wait

So it will be years and years before any payback on these two banks. They were once seen as an integral in playing a part to getting capital flowing to small businesses again - but now we have 'credit easing' for that, not bank lending!

And forget any kind of corporation tax come-back for the taxpayer, given accounting chicanery devices like Deferred Tax Assets, allowing corporates to cash in against future tax bills, seemingly indefinitely. Even if RBS does return to profit, a corporation tax claw-back for taxpayers' is eons off.
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