George Osborne hopes for £4.2bn from sale of 7.5% stake in Lloyds Bank
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Version 0 of 1. The government has moved a step closer to returning Lloyds Banking Group to the private sector as it kicked off the sale of a 7.5% stake in the bank, which is expected to raise up to £4.2bn. It is the second time in six months that the taxpayers' stake has been reduced and underlines the increasing confidence in the once crisis-stricken bank. The move suggests that the bailed-out bank will be back in private ownership before the general election next May. The stake was being placed with institutional investors, in line with advice from UK Financial Investments, which holds the stake on behalf of the government, that the latest sale be restricted to City investors. Chancellor George Osborne has outlined plans to allow small investors to buy up some of the shares, but City rules mean any sell-off to retail investors cannot take place for at least 90 days. In February, when the bank reported a statutory profit of £415m but a loss of £802m after tax, the bank's chief executive António Horta-Osório declared that Lloyds was now "a normal bank" and he was awarded a bonus of £1.7m. One well-placed source said UKFI opted for a placing of shares, rather than a wider offer, due to uncertainty about when Lloyds will restart dividend payments and volatility in the wider financial markets. The share sale, which is likely to be completed on Wednesday, will see the 7.5% stake in the bank sold at a small discount to last night's closing price of 79.1p in order to encourage buyers. It will reduce the taxpayer's interest from 32.7% to about 25%. Last September, the first tranche of Lloyds shares – a 6% stake – was sold at 75p, returning £3.2bn to Treasury coffers. While the second round of share sales will be welcomed as a sign of growing confidence in the bank, the taxpayer's profit from the £20bn bail-out is very modest: the average price at which the government pumped cash into Lloyds in 2008, to prevent the bank collapsing, was 73.6p a share. The share price has climbed by more than 60% in the last year. In his autumn statement last December Osborne declared his ambition that ordinary investors might soon be invited to acquire shares in future Lloyds sell-offs, saying UKFI was "developing the best mechanism" to allow the public to take part. "These preparations will allow those who rescued the bank to participate in its exit from government ownership," he said. At the time of the annual resultsHorta-Osório said he had stabilised the bank and that Lloyds was ready to go back into private ownership: "The market, I think, is ready as well. I came to Lloyds three years ago to fix this bank and help taxpayers get their money back." Horta-Osório added: "I am pleased that the government intends to sell a further stake in Lloyds Banking Group and allow taxpayers to get more of their money back. I believe this reflects the hard work undertaken over the last three years to make Lloyds a safe and profitable bank that is focused on helping Britain prosper." A Treasury spokesman said: "The government set out its objectives for its shareholdings in the banks in the chancellor's annual Mansion House address last June – getting the best value for the taxpayer, maximising support for the economy and restoring private ownership – and, as set out in that address, the government will only conclude a sale if these objectives are met." |