Further bank rescue as shares take a battering
Bank shares on Friday took a battering amid speculation that more financial institutions will have to be rescued by the Government.
Barclays stock was down 25% to its lowest level since 1993, while Royal Bank of Scotland lost 13%, the latter is 57.9% owned by the Government.
Last week alone, Lloyds TSB saw its shares lose 30% in value as it prepares to finalise its merger with HBOS this week.
Barclays has so far declined financial assistance from the UK Government and has instead raised billions of pounds, primarily from Middle East investors. The bank is adamant that this year’s profits will exceed analysts forecasts.
The news was particularly gloomy across the Atlantic after US banking giant Citigroup announced a worse-than-expected fourth quarter net loss of $8.29 billion (£5.6 billion) and said it plans to split the firm into two separate businesses to restore profitability.
Furthermore, emergency funding of $20 billion (£13.4 billion) was provided to Bank of America to enable it to absorb the losses it incurred following its takeover of Merrill Lynch.
In addition, the Irish Government announced on Friday that it was to nationalise Anglo Irish Bank to prevent it from collapse.
It is expected that Prime Minister Gordon Brown will announce a further bank bailout package tomorrow in an attempt to kick-start lending.
Several measures including a bank insurance scheme to cover banks against future bad loans is a possibility.
Last autumn, the Government injected £37 billion into three of the country’s largest banks. £20 billion was pumped into Royal Bank of Scotland, while a further £17 billion went to Lloyds TSB and HBOS.