UK is likely to break even or make a profit on its bailout of the banking system, a report from the National Audit Office claimed today.
The NAO said the country will probably suffer “no overall loss” from its £850bn injection into Britain’s struggling institutions, despite a lingering £512bn exposure to banks including Northern Rock, Lloyds and RBS.
The figures are much more optimistic than the Treasury’s estimate in 2009 that taxpayers would be on the hook for between £20bn and £50bn. The government said in its latest budget that the bailout would cost £2bn.
However, the report warns that the state’s 83 and 41 per cent stakes in RBS and Lloyds respectively stand to make a £12.5bn paper loss if the government were to sell its shares immediately.
For every 10p increase in the share prices, taxpayers would secure an additional £9bn on RBS and £3bn on Lloyds.
The sell-off is set to be six times larger than the largest European sale of already listed shares.
“Banks have made real progress as the NAO update shows,” said the British Bankers’ Association. “[It] supports the view that, when the government chooses to sell its shareholding in three banks, the taxpayer will be in the black.”
The report has found that the UK’s £5bn annual interest rate payments on loans used to rescue the banks are being more than covered by fees as the companies pay back the money.