Taxpayers stand to gain £7.4bn from rescued banks

Taxpayers could make billions from the banks they rescued during the financial crisis.

UK taxpayers were sitting on an estimated paper profit of £7.4bn in the bailed-out banks last night, after Northern Rock's "bad bank" swung into the black for the first time since the financial crisis.

Calculations by the Guardian suggest the banking sector is finally appearing to be generate a profit - at least on paper - for the taxpayer after a slew of positive results.

Today, Lloyds announced it is back in the black posting a £1.6bn pre tax profit in the first half of the year.

RBS is expected to follow suite on Friday.

The stakes in Lloyds and Royal Bank of Scotland were implying a profit of approximately £3.8bn at last night's closing prices - if the fee Lloyds paid to withdraw from the Government's toxic insurance scheme is taken into account.

Adding in the £2.5bn fee the asset protection agency, which polices the asset protection scheme, expects to make from RBS takes the profit to £6.3bn.

The £1.4bn of equity the taxpayer has invested in Northern Rock could be worth around £2.5bn on the basis of the prices at which other UK banks are trading, implying a potential profit of £1.1bn.