Lloyds Banking Group could pay out millions of pounds in dividends following last week’s profitable results.
As part of the conditions of their Government bail out in 2008 Lloyds was told to suspend dividend payments until the taxpayer backed loan had been paid back.
But last week Lloyds announced a £1.65 billion profit meaning they are on target to pay off their debt by 2012 and analysts say this could result in hefty dividend payouts of up to £15 billion.
The Government was forced to bail out Lloyds in 2008 after their acquisition of struggling banking group HBOS brought them near to collapse.
But despite the cost to the taxpayer Chief Executive Eric Daniels still believes the purchase was a good move that will benefit the public.
Speaking to the Telegraph he said: "I think we did the country a great service [buying HBOS] by not costing the taxpayer a bomb.
“The £20bn that taxpayers pumped into Lloyds for a 40pc stake is now breaking even, with Lloyds' shares ending the week at 73.75p compared with the 73.6p they originally cost.”
As well as Lloyds returning to profit Britain’s other major banking groups posted positive results with HSBC leading the pack with a £7 billion profit and RBS and Barclays seeing a turnaround in fortunes as well.
However, the good news looks likely to be offset this week with the Bank of England expected to detail a gloomy outlook in their August Inflation Report.
It is also thought that the bank will lower its May forecasts for growth of 3.2pc next year and 3.4pc in 2012, to take into account the impact of the austerity measures of the emergency Budget.
Chris Kinder from Threadneedle said: "The banking results across the board have been better than expected and, in certain cases, very strong. This has mainly been driven by impairment moderation and confirmation of robust capital ratios. The value of the banks shares prior to this reporting period were very cheap, with UK domestics trading at very low levels of price compared to 'normalised' earnings.
“Whilst this may be possible longer term, we would be uncomfortable predicting this price in the short term. We believe there will be some concerns over the next few months, particularly around the UK macro-ecomonic environment, the funding markets and speculation around the government stake disposal."
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