Unlike C LLoyd’s of London Jumps on Soft Nationalization Steak by U.K. Government

From 43% 2 60% ownership

Shares in Lloyds, the bank group which rescued HBOS, soared by 7.4 per cent in early trading today as it emerged the Government was on the verge of increasing its stake in the bank from 43 per cent to about 60 per cent.

The deal would see Lloyds ringfence risky assets worth up to £250 billion in the Government’s Asset Protection Scheme.

At the same time, the bank would convert the costly preference shares held by the Government, on which it is paying 12 per cent interest, into ordinary shares, which draw no interest. An agreement could be announced this afternoon.

Relieved investors sent Lloyds’ shares up 3p to 43.3p this morning. Lloyds had been hoping to announce an agreement with the Government over the Asset Protection Scheme last week.

However, it is understood that talks between the bank and the Government have been fraught over the amount of fees Lloyds has been willing to pay to take part in the scheme.

Lloyds insisted there was“no certainty” that it would join the scheme, under which banks pay a fee to have their bad loans underwritten by the Government, leaving them with more freedom to lend to customers and businesses.

A Lloyds spokesman said: “We are continuing our talks with the Treasury about our potential participation in the asset protection scheme. This is a complex subject and there remains a good deal of detail that needs to be worked through.”

A Treasury spokesman said: “Discussions are ongoing. A deal will be announced at the conclusion of those discussions.”

If agreed, the move would give the Government a greater say in the way the bank is run as ordinary shares, unlike preference shares, carry voting rights.

The Treasury has struck a similar deal with Royal Bank of Scotland.

Lloyds has been forced to go to the Government for further support because of the heavy losses run up by HBOS, which it took over to prevent its collapse.