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Bank sell-off will take time

IN the darkest depths of the banking crisis, many thought the government wouldn’t see a return on its investment in Lloyds or RBS. But with shares in Lloyds closing at 64.1p on Friday, it is now sitting on paper profits; accounting for all the fees Lloyds has paid for government support, it bought in at an average price of 63.2p. Using a similar calculation for RBS, it is around 5p away from break-even.

Investment bankers are sure to be rubbing their hands in anticipation of the huge fees they could earn for advising the government on its divestment, but that day is still some way off. There is little appetite for £17bn worth of Lloyds shares or £45bn of RBS ones in the current climate. Nor does the government want to sell before the election, which is a shame for private investors. Instead, it would rather use its clout to try and force the banks to lend to small businesses.