Page last updated at 21:55 GMT, Monday, 16 February 2009

No 10 rules out Lloyds bank move

Lloyds TSB branch

Gordon Brown's government does not plan to nationalise banking group Lloyds, his spokesman has said.

Lloyds Banking Group shares fell 20% in morning trade in reaction to Friday's announcement of massive losses at HBOS, and closed down 8% at 56.40 pence.

The early slump raised concerns Lloyds, which is 43%-government owned, could need more funds or be nationalised.

But a spokesman for Mr Brown said the government was giving "no active consideration to nationalising Lloyds".

Wider stability

And the spokesman added that Mr Brown had no regrets about allowing the merger between Lloyds TSB and HBOS to go ahead, his spokesman has said.

He added that the prime minister still believed the merger was in the interests of the wider stability of the financial system.

Lloyds shares had already fallen by 32% on Friday after it announced it expected losses of nearly £11bn for 2008 at HBOS.

And after volatile Monday trading, shares fell further into negative territory after the ratings agency Moody's downgraded Lloyds' bank deposit and senior debt ratings.

Moody's cited "the high level of troubled and higher risk exposures within HBOS" which it considered would weaken the profitability of the overall group.

Further injection?

The government has already poured £17bn into the Lloyds Banking Group.


However, some analysts are now questioning Lloyds' decision to take over HBOS, and believe that it may need to be nationalised, like Northern Rock.

But speaking to the BBC, financial secretary to the treasury Stephen Timms said the government was "not contemplating at the moment" putting any more money into Lloyds.

"I am confident that, in the long term, this [Lloyds] is going to be a strong and successful commercial operation," he said.

However, he added that the government would "take whatever action is needed to secure long-term stability in the financial system".

'Financial recognition'

Over the weekend, it emerged that Lloyds planned to reward retail and commercial staff with bonuses reportedly worth about £120m.

Lloyds said its employees deserved "financial recognition" for hitting targets, but the group has been criticised by investors and politicians for rewarding failure following the government bail-out.

The government and the Tories have said executives should not receive bonuses, but staff on lower salaries should.

Lloyds' five executive directors have all voluntarily agreed to forego any bonus they may be awarded for 2008.

Last week, bosses and former bosses of key British banks were grilled by MPs about their role in the financial crisis.

The former heads of the two biggest UK casualties of the banking crisis - Royal Bank of Scotland and HBOS - apologised "profoundly and unreservedly" for their banks' failure.

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