Bottom Line: Privatise this bank and let it flourish

Tim Wallace
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LLOYDS suddenly looks like Britain’s least-troubled bank, with soaring shares, a return to profit and almost all of its business focused on core UK markets. Its position is in stark contrast to much of the rest of the sector.

RBS is getting a new boss to push the government’s favoured strategy of cutting back investment banking, while Barclays is under attack from regulators’ demands for more capital, and the Nationwide is being forced to bolster its capital position despite favouring strong, secured lending.

But Lloyds has moved well beyond similar woes and is expanding its core areas of business, plugging loans to small businesses, for instance.

Most importantly, it is making a profit and its shares are well above the bailout price, bouncing around 74p in recent weeks, well above the 61p the state needs to break even on a sale.

The only event now that could provide another spike to the share price, and a better return for the government, is detail on dividends.

But Lloyds boss Antonio Horta-Osorio has already said he wants a high dividend bank, hinting payouts could hit 70 per cent of earnings. This lifted the price last month, so little gain is likely when payouts re-start.

The only reason left to hold on to the 39 per cent stake is a speculative hope that the shares rise, giving the chancellor a pre-election boost – and that can only be a dangerous tactic, particularly if the Eurozone flares up or the Treasury meddles, as it has with RBS. A sale on the other hand would at last free Lloyds to become a creative, forward looking bank, really boosting the sector and the economy.