Strong demand from retail investors for Lloyds shares

The British government bailed out Lloyds during the financial crisis in 2008 at a cost of some £20 billion, taking out an initial stake of 43 percent. Picture: AFP/Getty Images

The UK government announced on Monday that it will offer at least £2 billion worth of discounted shares in the taxpayer-backed bank to the public next spring.

With some analysts predicting that people could earn £200 in a year from a £1,000 investment, initial demand has been massive, with 62,500 expressing an interest by Monday night.

The government has already revealed that anyone applying for less than £1,000 worth of shares will be prioritised in a bid to stop wealthier investors snapping up the lot, and given the initial level of interest it could mean many larger investors lose out.

The shares are being offered to the public at a discount of 5 per cent on the market price, and successful buyers will also receive one bonus share for every ten purchased and held for a year (up to a maximum benefit of £200).

And once the expected dividend is factored in, investors could be set for a “pretty attractive” return, said Hargreaves Lansdown senior analyst Laith Khalaf.

“Based on £1,000 invested, you could expect a £50 price discount, an anticipated £50 dividend in 2016 – if the market price remains at today’s level at the time of the sale – and a further £100 in bonus shares a year down the line,” he said.

The government pumped more than £20 billion into Lloyds in a bid to prop up the bank in the midst of the financial collapse. It has been gradually selling off shares to institutional investors, but this marks the first chance for the general public to get involved.

All proceeds from the sale will be used to pay down the national debt.

The generous discounts offered to investors could prove controversial. Unless the share price rises between now and the sale, investors could effectively buy shares for less than the average bail out price paid by the Treasury, meaning taxpayers might take a hit on the sale.

Releasing more details of the sale, the Treasury said military personnel stationed overseas and their spouses would be able to participate, where possible.

“There will be a nationwide TV, print and digital information campaign to provide further details ahead of the sale,” it said.