Lloyds shares hit by nationalisation rumours

| February 16, 2009 | 0 Comments

Lloyds Banking Group shares have fallen further this morning after closing more than 30% down on Friday following the news of a potential £10 billion loss at HBOS.

Lloyds, which is 43% owned by the taxpayer, saw its shares fall 7.4p to 54p this morning amid speculation that the Government may be forced to inject more money into the bank, or even nationalise it.

While ministers have not ruled out nationalisation, Chancellor Alistair Darling has insisted that it is best for banks to remain in the private sector.

Lloyds has also been criticised for planning bonuses for its staff. A report in the Sunday Telegraph revealed that Lloyds is planning staff bonuses of up to £120 million, despite being bailed out by the taxpayer to the tune of £17 billion.

Lloyds defended the bonuses and said its employees deserved ‘financial recognition’ for hitting targets’.

The bank said that many of its ‘branch colleagues earn just £17,000 a year and will get a bonus of less than £1,000′ and added that five of the group’s executive directors have all voluntarily agreed to forego any bonus they may be awarded for 2008.

Last week, Chancellor Alistair Darling announced that an inquiry is to take place into the operations of banks. The review will examine how banks are managed and Mr Darling expects the review to make recommendations about the effectiveness of risk-management by banks’ boards, including how pay affects risk-taking.

The speculation over Lloyds has brought down other banking shares with Barclays and RBS down 5% and 6% respectively.

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