A succession of bank bail-outs have certainly left the government with an unprecedented level of control over the UK's banks. But with Lloyds having announced a £4bn private fund-raising - to replace government-held preference shares - and following the departure of its HBOS-tainted chairman Sir Victor Blank, the high point of government intervention may have passed.
Ironically, given that Sir Victor effectively did the government's bidding in rescuing HBOS from oblivion, it appears to have been UK Financial Investments, which manages the state's banking investments, that made his departure inevitable. It will want Lloyds' private fund-raising to succeed, and that may have been less likely with Sir Victor still in place, given how grim HBOS' losses have turned out to be. "That decision [the merger] was clearly a mistake and has resulted in a good quality bank, which paid a high dividend, being intermingled with the poor assets of HBOS," commented the UK Shareholders' Association.
Moreover, Barclays' prospects of avoiding state influence appear to have improved further. That's because Barclays might sell its asset management unit, Barclays Global Investors (BGI), for as much as $10bn (£6.5bn); potential bidders could include Bank of New York or BlackRock. Losing the 15 per cent of group profits that BGI generates is hardly ideal, but it could provide Barclays with a much needed capital boost. "The benefit of raising book value and capital while avoiding government intervention outweighs this [revenue] loss," says Alex Potter, banking analyst at Collins Stewart.
The run up in banking shares has stoked rumours that the government could soon begin the process of divesting its bank shares, possibly to overseas players such as sovereign wealth funds, within a year.
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