Black is the colour of spring

So many will see it as firm evidence of better times that Lloyds says it was in profit during the first three months of the year and expects to be in profit for the remainder of 2010 too.

This represents a remarkable turnaround from losses of more than 6bn in 2008 and in 2009 for the two banks, Lloyds TSB and HBOS, which came together in a controversial marriage to form the Lloyds Banking Group we know today.

And it's a better performance than Lloyds expected even a month ago, when it predicted that for the whole of the current year it would return to the black.

There have been two significant contributors to the recovery a sharp fall in the losses on loans going bad, and a pronounced widening in the gap between what Lloyds charges for loans and what it pays depositors. Which may stoke complaints that banks are paying too little to savers and charging too much to borrowers.

There is also growing evidence that taxpayers will emerge with a profit, perhaps a significant one,replica love bracelet from cartier, on the emergency investment the state pumped into Lloyds and Royal Bank of Scotland, to prevent them collapsing.

At their current share prices,replica bracelet cartier, taxpayers are a few billion pounds up on the 66bn we paid in aggregate for our stakes in those two banks (on this morning's share price,replica cartier love bracelet steel, Lloyds remains a smidgeon below the 73.6p we paid for our 41% stake, and RBS shares are well clear of taxpayers' 50.2p average purchase price).

That's not to say that everything in Lloyds' garden is spring like and rosy.

The bank still faces a formidable challenge to reduce its dependence on loans and guarantees provided by British and overseas taxpayers,replica cartier love bangle bracelet, that totalled some 157bn last year.

And some will fear that Lloyds and other banks are not yet providing the credit to viable borrowers that a growing economy requires as indicated by Lloyds remarks that its lending balances remain flat.

But back to that question of whether and when we might pocket a real, cash profit on our holdings in Lloyds and Royal Bank of Scotland. Here are a couple of points to consider.

First, that the initial mechanism for liquidating the stakes will probably involve selling a portion in the form of convertible government bonds (or government bonds convertible at a future date into shares of RBS or Lloyds at a pre determined price).

This would allow the government in theory to borrow a few tens of billions of pounds relatively cheaply, at a time (no secret here) when it has quite a large borrowing appetite.

Second, even if we do emerge with a profit on the rescues of Lloyds and Royal Bank of Scotland, no one I assume would believe that represents adequate compensation for the role played by banks in causing the worst recession since the 1930s (which in turn is causing the worst crisis of confidence in sovereign borrowers for several decades too).

Comment number 1. At 08:59 27th Apr 2010, barry white wrote: Ohh what can we buy with our cash when it gets paid back?

Its just like a christmas club for the country. Is this how the government plans to sort things out?

Not that we trust the banks to pay any back, I am sure they will find a loophole somewhere to delay any payment and then charge for cheque. It would be a big charge as well going on the charges I get hammered with.

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Comment number 2. At 09:04 27th Apr 2010, Alanv111 wrote: The question never answered by politicians is just who are we in debt to and what are the terms of repayment. Speculation is we have borrowed from the Middle east and/or China. How is the borrowing done; bonds?

Clearly the UK can't generate funding from within its own borders.

Can Robert Peston give the public a lead on this question which is fundamental to how we recover? Thanks

Alan Lewin

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Comment number 3. At 09:23 27th Apr 2010, Jacques Cartier wrote: These people are cheeky monkeys! They are conning their own customers.

Any fool, even a banker, can make money if you borrow at 0% and lend at 4%. The trick is to make money when we've broken them up to make them compete.

Once there are dozen of banks, they won't find it so easy to con people into paying 4% when the bank next door offers 1.5%.

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Comment number 4. At 09:26 27th Apr 2010, James wrote: Yes we can generate funding in our own borders the private sector/individuals lend to the state. And as individuals are the owners of the state we have lent money to ourselves. Some money may come in from abroad, just as a Briton might buy Greek Bonds, but that is a separate issue and a separate balance. We don't owe the National Debt to foreigners.

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Comment number 5. At 09:28 27th Apr 2010, wholistens wrote: I do wish commentators would put more details on these lending figures.