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Government cuts taxpayer stake in bailed out Lloyds Bank to below 7% Government loses another £130m on Lloyds Bank bailout after cutting stake below 7%
(about 3 hours later)
The Government has cut its stake in Lloyds Banking Group to below 7 per cent meaning £17.5 billion of a £20.5 billion taxpayer bailout has now been recovered. The Government has now lost around half a billion pounds on bailed out Lloyds Banking Group after selling more shares for less than taxpayers paid to save the lender from meltdown.
UK Financial Investments, which manages the stake in Lloyds, cut its holding in the lender to 6.93 per cent from 7.99 per cent just weeks after the last share sale. UK Financial Investments, which manages the stake in Lloyds, cut its holding to 6.93 per cent from 7.99 per cent. The shares have been trading below 60p in recent weeks having plummeted in the wake of the Brext vote. This compares to the 77p paid by the taxpayer at the height of the financial crisis.
In October Philip Hammond scrapped a pledge to offer the shares to the public at a discount, choosing instead to offer them to large institutional investors. The Treasury aims to sell all Lloyds shares within a year and says it will use proceeds to reduce the national debt. UKFI has not disclosed the exact price achieved in the current round of sales but at 60p it crystalises a loss to the Treasury of £128 million. Some politicians and banking analysts have questioned whether restarting sales in the middle of a slump in bank shares represents the best value for taxpayers.
The latest loss adds to around £400 million that the Treasury is already down on its Lloyds stake, according to the Office of Budget Responsibility. However the amount is dwarfed by the £32.4 billion deficit on the Governement's RBS shares. In November the OBR said the total cost of the bailout for all banks stands at £26.8 billion.
In October Philip Hammond scrapped a pledge to offer Lloyds' shares to the public at a discount, choosing instead to sell them to large institutional investors with the sale managed by investement bank Morgan Stanley. The Treasury aims to offload all Lloyds shares within a year and says it will use proceeds to reduce the national debt.
It has progressively sold down its original 43 per cent stake, but the shares have languished well below their bailout price since June's Brexit vote.
 
The latest sale means £17.5 billion of a £20.3 billion taxpayer bailout has now been recovered, according to UKFI. However, the true cost of the bailout is higher as this figure does not take into account interest payments on the money the Government borrowed to fund the bailout. Nor does it include the fees paid to Morgan Stanley and others for their services.
Simon Kirby, economic secretary to the Treasury, said: “Selling our shares in Lloyds Banking Group and making sure that we get back all the cash taxpayers injected into it during the financial crisis is a key government priority. So I am pleased that we have continued to reduce our stake in Lloyds.”Simon Kirby, economic secretary to the Treasury, said: “Selling our shares in Lloyds Banking Group and making sure that we get back all the cash taxpayers injected into it during the financial crisis is a key government priority. So I am pleased that we have continued to reduce our stake in Lloyds.”
The Government has progressively sold down the 43 per cent stake in Lloyds it took on as the lender faced collapse at the height of the financial crisis.
A Lloyds spokesman said: “Today's announcement shows the further progress made in returning Lloyds Banking Group to full private ownership and enabling the taxpayer to get their money back.A Lloyds spokesman said: “Today's announcement shows the further progress made in returning Lloyds Banking Group to full private ownership and enabling the taxpayer to get their money back.
“This reflects the hard work undertaken over the last five years to transform the group into a simple, low-risk and customer-focused bank that is committed to helping Britain prosper.”“This reflects the hard work undertaken over the last five years to transform the group into a simple, low-risk and customer-focused bank that is committed to helping Britain prosper.”
Last month Lloyds said it had set aside another £1 billion to meet compensation claims for the mis-selling of payment protection insurance (PPI) as it attempts to draw a line under the scandal.Last month Lloyds said it had set aside another £1 billion to meet compensation claims for the mis-selling of payment protection insurance (PPI) as it attempts to draw a line under the scandal.
The Government still retains a 73 per cent stake in Royal Bank of Scotland, which has been hit by ongoing scandals, keeping its share price low and making an imminent disposal unlikely.The Government still retains a 73 per cent stake in Royal Bank of Scotland, which has been hit by ongoing scandals, keeping its share price low and making an imminent disposal unlikely.
In October, leaked internal documents supported allegations that the bank had systematically squeezed its small business owner customers in order to extract profits from them when they were at risk of insolvency. RBS also faces  up to $12 billion in fines from US regulators over a probe into mis-selling of mortgage-backed securities.In October, leaked internal documents supported allegations that the bank had systematically squeezed its small business owner customers in order to extract profits from them when they were at risk of insolvency. RBS also faces  up to $12 billion in fines from US regulators over a probe into mis-selling of mortgage-backed securities.