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Lloyds Group shares go for a roller-coaster ride

SHARES in Lloyds Group went for a roller-coaster ride yesterday following its revelation of larger-than-expected losses at recently acquired Halifax-Bank of Scotland and on market fears that the combined company may be headed for nationalization.

Shares plummeted 30 percent on Friday and continued south when the market opened yesterday, losing 20 percent in the first hour, reversing the losses to be up 6 per cent by noon before dropping again.

Lloyds shocked the market last week with its announcement that HBOS would likely post an annual pretax loss of about 10 billion pounds ($14.4 billion) for last year.

The British government, which has pumped 17 billion pounds into Lloyds, holds 43.5 percent of the shares in what is now Britain's third-largest bank.

Treasury chief Alistair Darling has not ruled out nationalization but said over the weekend that banks would be "best run in the commercial sector and privately owned."

Stephen Timms, financial secretary at the Treasury, said the government was not contemplating a further investment at the moment.

"We are obviously watching what's happening but, as I say, I am confident that in the long term this is going to be a strong and successful commercial bank," Timms said yesterday.

The government encouraged Lloyds Group to take over HBOS to save it from collapse.

Alex Potter, analyst at Collins Stewart, said that "no banking book this big worsens that spectacularly even in these markets."

"We cannot discount the prospect of Lloyds requiring further capital if HBOS turns even worse," Potter said. "For the equity investor this means the bank is not that cheap with a chance of major further dilution."


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