Share prices in Lloyds Banking Group have surpassed what the City regards as the "real" break even point for the taxpayer as the group reports a swing to profit in the first half of the year.
This morning, the Lloyds share price passed the 73.6p "real" break-even point, which represents the average price at which the then government acquired the shares. It had already passed the lower break-even price of 61.2p in May this year, which takes into account the fees already paid by the bank to the authorities for the state guarantees and insurance it received following its bailout.
This comes as the bank reports it returned to profit in the six months to the end of June, making £2.1bn in the period – up from a £456m loss the year before.
But while "bad" debts fell by 43 per cent to £1.8bn, the group was hit by an extra £450m needed to set aside for dealing with costs related to the mis-selling of payment protection insurance (PPI). This brings the total set aside for PPI claims by Lloyds to £7.275bn.
Barclays’ announcement on Tuesday that it would need to find another £1.35bn to deal with PPI mis-selling on top of the £2.77bn already set aside and Lloyd's announcement this morning brings the total PPI bill for the banking industry to around £18.4bn. The UK’s four biggest banks – Lloyds, Barclays, RBS and HSBC – account for over £15bn of the total, with RBS setting aside £2.3bn and HSBC £1.6bn.
As part of this £450m extra, Lloyds set aside £50m to re-check claims after an investigation by the Times found staff working at a Deloitte-run call centre at Royal Mint Court had been encouraged to delay and deny compensation requests in the hope they would be dropped.
Lloyds subsequently terminated its contract with Deloitte and the work is now being carried out by Huntswood.
The bank's first half results that pushed share prices past the break-even point have prompted speculation Lloyds could be ready for sale imminently, with some speculating chancellor George Osborne could announce the sale as early as next week.
A spokesman for the UK Treasury said that while the results reveal a stronger and safer bank, there is no timetable for a sell off.
The bank says it continues to target an initial public offering in the middle of next year, and said it will be talking to regulators over the coming months about resuming dividend payouts on shares. Plans are in place to rebrand the business as TSB bank, which will be visible on the high street from 9 September this year and begin launching products around the end of 2013.
Chief executive Antonio Horta-Osorio said:
We are now well on track to create a bank with a leading cost position, lower risk, a lower cost of equity, and products and services focused on our customers' needs, to deliver strong, stable and sustainable returns to our shareholders.