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Share dealers advised to hold onto Lloyds stock despite £10.8 billion loss

03 March 2009 / by Rachel Mason
Retail stockbroker, The Share Centre is advising most shareholders to hold onto their Lloyds Banking Group shares.

Although the share dealing firm says that there may still be "HBOS skeletons in the closest" and that investors should exercise caution, advice to the majority of Lloyds Banking Group share holders is to hold on selling.

"Had Lloyds not acquired HBOS last year we would have seen profits, which will frustrate many shareholders," said Nick Raynor, investment adviser at The Share Centre.

"We feel that we have not seen the full effects of the HBOS acquisition and therefore The Share Centre remains cautious towards Lloyds."

Mr Raynor says that it will take time for the effects of the HBOS deal to filter through fully, and predicts cost cutting measures and redundancies to be announced soon, however, his advice for most shareholders is to sit tight for now.

"For most investors we recommend they hold on selling shares. Those with medium to high risk strategies should hold and keep an eye on developments.

"We recommend low risk investors sell and only experienced high risk day traders buy in. In general, we are more confident in Lloyds Banking Group than RBS who announced record losses."

The Share Centre may be more confident in Lloyds than RBS, but the bank itself is currently trying to avoid full scale nationalisation.

According to reports, Lloyds Banking Group has been battling to keep the Government's stake under 50 per cent, despite the fact it has just had to ask for further funding to stay afloat.

The taxpayer currently owns 43 per cent of Lloyds Banking Group, and executives are now said to be trying to secure further taxpayer cash - £250billion of assets as part of the Treasury backed insurance scheme.

According to the Guardian, the Government wants £4billion in preference shares and has told Lloyds it must sign a legal document to ensure it will lend at least £10billion more to small businesses and households. Normally, this kind of deal would push the Government stake above 50 per cent, but it is thought that talks are close to converting assets in such a way that the taxpayers' share does not exceed 43 per cent.

Vince Cable, treasury spokesman for the Liberal Democrats says the Government should not let Lloyds push it around, and if it is forced to bail the bank out further, it should get a larger stake in return.

"It looks inevitable that Lloyds will now require further taxpayer support, but if this is the case it must be in return for a further stake in the company.

"The Government must bite the bullet and realise that it may need effective public control of both Lloyds and RBS," he said.

© Fair Investment Company Ltd