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| Lloyds to raise £400m selling part of St James's Place stake | Lloyds to raise £400m selling part of St James's Place stake |
| (2 days later) | |
| Bailed-out Lloyds Banking Group is planning to raise up to £400m by selling off part of its stake in the wealth management group St James's Place in a move which will bolster its capital cushion. | Bailed-out Lloyds Banking Group is planning to raise up to £400m by selling off part of its stake in the wealth management group St James's Place in a move which will bolster its capital cushion. |
| Lloyds, which inherited a 60% stake in the firm following its rescue of HBOS in 2008, expects to retain a stake in St James's Place following the placing of shares on the stock market expected to take place in the coming days. | Lloyds, which inherited a 60% stake in the firm following its rescue of HBOS in 2008, expects to retain a stake in St James's Place following the placing of shares on the stock market expected to take place in the coming days. |
| The shares being sold are the equivalent to a fifth of St James's Place, which already has a place in the FTSE 250 stock market index where its shares have been rallying in recent months from just under 400p in December to about 530p at Monday's close. | The shares being sold are the equivalent to a fifth of St James's Place, which already has a place in the FTSE 250 stock market index where its shares have been rallying in recent months from just under 400p in December to about 530p at Monday's close. |
| The potential for a sale of the entire stake has been the subject of stock market speculation for many months and the decision to sell off only part of the stake – leaving the bank with 37% – allows Lloyds to be able to continue to place non-executive directors on its board. | The potential for a sale of the entire stake has been the subject of stock market speculation for many months and the decision to sell off only part of the stake – leaving the bank with 37% – allows Lloyds to be able to continue to place non-executive directors on its board. |
| As a result of the price at which Lloyds intends to sell the shares, the proposed selloff of part of the stake is the equivalent to a £600m boost to its crucial tier one capital. | As a result of the price at which Lloyds intends to sell the shares, the proposed selloff of part of the stake is the equivalent to a £600m boost to its crucial tier one capital. |
| The bolstering of Lloyds' capital comes at a time when the Financial Services Authority is reviewing the capital cushions of all the major banks and the regulator is expected to provide a formal update on the health of the banking industry later this month through the Bank of England's financial policy committee. | The bolstering of Lloyds' capital comes at a time when the Financial Services Authority is reviewing the capital cushions of all the major banks and the regulator is expected to provide a formal update on the health of the banking industry later this month through the Bank of England's financial policy committee. |
| Lloyds, just under 40% owned by the taxpayer, is also preparing itself for a partial privatisation after the bonus of its chief executive, António Horta-Osório, was linked to the shares being sold off at 61p or higher. | Lloyds, just under 40% owned by the taxpayer, is also preparing itself for a partial privatisation after the bonus of its chief executive, António Horta-Osório, was linked to the shares being sold off at 61p or higher. |
| The government has previously been using 73.6p as the average price at which it bought Lloyds shares, which closed on Monday at 50p, during the 2008 and 2009 bailouts, but stunned the City last month with the lower threshold for a possible selloff. | The government has previously been using 73.6p as the average price at which it bought Lloyds shares, which closed on Monday at 50p, during the 2008 and 2009 bailouts, but stunned the City last month with the lower threshold for a possible selloff. |
| St James's Place calls its 1,800 sales advisers "partners" and they are effectively regarded as "restricted" agents by the FSA in terms of the products they sell. St James's Place does not have its own fund managers but selects from a panel of external managers to manage funds for about 170,000 clients. | St James's Place calls its 1,800 sales advisers "partners" and they are effectively regarded as "restricted" agents by the FSA in terms of the products they sell. St James's Place does not have its own fund managers but selects from a panel of external managers to manage funds for about 170,000 clients. |
| Analysts at Barclays have described St James's Place as having "one of the simplest business models" of the UK life insurance sector, charging its customers a flat fee and then paying its "partners" half a percentage point of commission on each sale. | Analysts at Barclays have described St James's Place as having "one of the simplest business models" of the UK life insurance sector, charging its customers a flat fee and then paying its "partners" half a percentage point of commission on each sale. |
| It appears to be withstanding the pressures of the FSA's retail distribution review – which is demanding clear information about how advisers charge for advice – as its wealthier clients are not objecting to its funding models. | It appears to be withstanding the pressures of the FSA's retail distribution review – which is demanding clear information about how advisers charge for advice – as its wealthier clients are not objecting to its funding models. |
| David Bellamy, chief executive of St James's Place, said the decision by Lloyds would bolster its shares: "We believe that increased liquidity in our shares and a broader shareholder base is beneficial to our business and our shareholders." | David Bellamy, chief executive of St James's Place, said the decision by Lloyds would bolster its shares: "We believe that increased liquidity in our shares and a broader shareholder base is beneficial to our business and our shareholders." |
| Analysts at Oriel Securities agreed: "This is good news for St James's Place. It increases the effective free float and liquidity of the shares." Lloyds has agreed not to sell off any more of its stake for a year once the current share sale is completed. | Analysts at Oriel Securities agreed: "This is good news for St James's Place. It increases the effective free float and liquidity of the shares." Lloyds has agreed not to sell off any more of its stake for a year once the current share sale is completed. |
| As well as managing funds for clients, St James's Place has also faced scrutiny for the tax avoidance schemes it offers. In October 2009, a Surrey-registered firm, Financial Lifestyle Management, offered to introduce clients to St James's Place about ways to reduce income tax on salary and tax planning on any bonuses. | As well as managing funds for clients, St James's Place has also faced scrutiny for the tax avoidance schemes it offers. In October 2009, a Surrey-registered firm, Financial Lifestyle Management, offered to introduce clients to St James's Place about ways to reduce income tax on salary and tax planning on any bonuses. |