Lloyds Banking Group defensive over Government shareholding

by Gill Montia

Story link: Lloyds Banking Group defensive over Government shareholding

Lloyds Banking Group, the entity formed out of the merger of Lloyds TSB and HBOS, is reported to be hostile to government proposals to convert its holding of preference shares in the new group into ordinary shares.

The Government currently holds a 43% stake in Lloyds Banking Group, which from today becomes the UK’s biggest retail bank.

A conversion of the shares would increase public ownership of the banking behemoth to over 50% but would release the bank from the fixed dividend paid to preference shareholders, regardless of profitability.

However, it would also give the Government shareholder voting rights, which as a preference shareholder it does not currently have.

The proposed change is aimed at freeing-up cash for the banks that took advantage of the £37 billion bank bail-out in October, namely Lloyds TSB / HBOS and Royal Bank of Scotland.

Meanwhile the chairmen of the UK’s leading banks have met with the Bank of England, the Financial Services Authority and the Treasury over the weekend to discuss new ways of freeing up lending, which could commit the taxpayer to £200 billion in cash and guarantees.

Shares in Lloyds Banking Group begin trading today.