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| Version 2 | Version 3 |
|---|---|
| Taxpayer deal hits Lloyds shares | Taxpayer deal hits Lloyds shares |
| (40 minutes later) | |
| Shares in Lloyds Banking Group have fallen more than 8% in the first trading since it did a deal that will make it majority government-owned. | |
| Lloyds has signed up to the Asset Protection Scheme, that will insure £260bn of its toxic loans. | |
| The government's stake in the bank will rise from 43% to 65%. | The government's stake in the bank will rise from 43% to 65%. |
| It comes as staff wait to find out who will receive a share of £80m cash bonuses on offer. Members of the board will not receive bonuses. | It comes as staff wait to find out who will receive a share of £80m cash bonuses on offer. Members of the board will not receive bonuses. |
| The bank stressed that staff who receive bonuses will earn on average £17,000, but there are still expected to be questions asked about the payments by opposition politicians. | The bank stressed that staff who receive bonuses will earn on average £17,000, but there are still expected to be questions asked about the payments by opposition politicians. |
| Branch workers | Branch workers |
| Lloyds has insisted that executive directors will forgo their bonuses, and other senior staff will have theirs deferred until at least 2010 - with the possibility that these could be clawed back if performance misses targets. | Lloyds has insisted that executive directors will forgo their bonuses, and other senior staff will have theirs deferred until at least 2010 - with the possibility that these could be clawed back if performance misses targets. |
| Staff are graded in eight bands, and it is understood that employees within bands five to eight will receive bonuses in cash. | Staff are graded in eight bands, and it is understood that employees within bands five to eight will receive bonuses in cash. |
| ASSET PROTECTION SCHEME Taxpayers underwrite banks' bad debtsEssentially an insurance schemeBanks pay a fee to take part - Lloyds will pay £15.6bnBanks are liable for initial losses, similar to paying the excess on an insurance claim, and then for 10% of further losses In pictures: How the UK banking crisis unfolded | |
| Lloyds said that most of these workers are employed in branches and the average payout would be around £1,000. | Lloyds said that most of these workers are employed in branches and the average payout would be around £1,000. |
| The group added that the deal had been approved by UK Financial Investments, which manages the government's stake in financial institutions. | The group added that the deal had been approved by UK Financial Investments, which manages the government's stake in financial institutions. |
| In addition, unions have insisted that staff from the former Lloyds TSB deserve their bonuses as that side of the group remained in profit. | In addition, unions have insisted that staff from the former Lloyds TSB deserve their bonuses as that side of the group remained in profit. |
| Lloyds Banking Group had to turn to the Treasury for help following its takeover of HBOS, which recently reported an annual loss of nearly £11bn. | Lloyds Banking Group had to turn to the Treasury for help following its takeover of HBOS, which recently reported an annual loss of nearly £11bn. |
| By 1120 GMT, Lloyds Banking Group shares were down 8.1% at 38.6 pence. | By 1120 GMT, Lloyds Banking Group shares were down 8.1% at 38.6 pence. |
| Other banking shares have also fallen, with Barclays down 10% to 58.3p, HSBC down 9.8% at 325.5p and Royal Bank of Scotland falling 8.1% to 18.2p. | |
| 'Eliminating risk' | |
| Analysts welcomed the insurance deal with the government, but were surprised by the amount that the government's stake in the bank could have to rise. | |
| "The guaranteed asset protection scheme looks to be very thorough, in terms of virtually eliminating the risk of full nationalisation... but also in terms of diluting the existing shareholders," said Bruno Paulson, analyst at Bernstein. | |
| Lloyds will be responsible for the first £25bn of any losses from the toxic assets and a further 10% of any further losses. | |
| The government will take on the other 90% and will be paid £15.6bn by Lloyds for doing so, although the payment will be in non-voting "B" shares. | |
| The government's stake in Lloyds will rise to 65% if shareholders do not take up an offer to buy £4bn of the government's shares. | |
| It would go up to 77% if the "B" shares were to be converted into ordinary shares. |