LONDON -(Dow Jones)- U.K. taxpayers are still expected to make a profit out of their investments in bailing out domestic banks, the head of the agency that manages the government' stakes in state-supported banks said Wednesday.
"I would certainly expect us to see a positive return on our portfolio over time," said John Kingman, chief executive of U.K. Financial Investments Ltd., giving testimony before the U.K. parliament's treasury committee.
The UKFI chief's comment comes a day after the government announced it will pump an additional GBP31.2 billion of taxpayer funds into Royal Bank of Scotland Group PLC (RBS) and Lloyds Banking Group PLC (LYG).
Kingman said the future path of the economy will be the key determinant of whether the taxpayer makes a profit from these investments, because that will determine how the shares perform.
The government owns a 43% stake in Lloyds and a 70% stake in RBS, which is set to rise to 84% as part of the new capital injection. It also owns Northern Rock PLC and holds the mortgage book of Bradford & Bingley PLC.
RBS and Lloyds agreed, as part of the new cash injection, not to pay bonuses to staff earning more than GBP39,000. Kingman said UKFI will need to discuss with the management of both banks what the size of the total bonus pots will be.
He said UKFI needs to balance the need to assuage public anger at the size of bonuses with its interest in attracting the best staff to boost profits at these banks.
-By Adam Bradbery, Dow Jones Newswires; 44 20 7842 9305; adam.bradbery@dowjones.com