THE taxpayers’ stake in Lloyds Banking Group is to be slashed after George Osborne yesterday pledged to sell a further £9 billion of shares.
The disposals, expected to take place this year, would add to the £8.5bn that has been recovered since £20bn was pumped into Lloyds during the financial crisis.
At the current share price, the £9bn sale would reduce the Treasury’s stake in the taxpayer-backed lender from 23 per cent to about 7 per cent.
The Chancellor also announced plans for the sale of £13bn in mortgage assets held from the forced nationalisation of Northern Rock and Bradford & Bingley, but his Budget speech contained no reference to Royal Bank of Scotland, which is still 80 per cent owned by the taxpayer.
The task of selling the Lloyds shares has been made easier in recent weeks by the bank’s recent decision to pay a dividend to its three million shareholders for the first time since its taxpayer rescue.
The dividend, which raised at least £100 million for the Government, was announced alongside a four-fold rise in annual profits to £1.8bn.
Osborne said: “Lloyds bank has returned to profit and is paying a dividend – so we can continue our exit from that bailout. We will sell at least a further £9bn of Lloyds shares in the coming year.”
A spokesman for Lloyds, which also owns the Bank of Scotland and Halifax brands, declined to comment yesterday.
In a letter to the Chancellor, James Leigh-Pemberton, executive chairman of UK Financial Investments – which manages the state’s holdings in Lloyds and fellow bailed-out lender Royal Bank of Scotland – said Lloyds has “continued its path towards becoming a stronger, healthier bank.”
He added: “In addition, the bank’s recent results – including the dividend announcement – have created favourable sentiment towards the shares and have made it possible for a broader range of investors, including income funds, to invest in them.
“The share price move, the increase in liquidity as a result of the trading plan and the potential for new buyers means that there are now more options to sell shares in different ways. For the same reasons, I also expect to be able to undertake larger transactions than have been possible to date.
“As a result, my judgment is that the sale of around £9bn worth of Lloyds shares in fiscal year 2015-16 would be achievable while delivering value for money for the taxpayer, subject to market conditions and sufficient flexibility on the appropriate time and method of disposal.”
The government estimates it could raise about £20bn this year through the sale of Lloyds shares and the assets of Northern Rock and B&B.
The amount recovered since the 2010 formation of UK Asset Resolution (UKAR) – the state-owned firm responsible for winding down the mortgage books of Northern Rock and B&B – stood at £12bn in October. UKAR said that a strategic review of options to accelerate repayment of the government loans found positive investor interest in the assets of both former lenders, as well as in the mortgage servicing capabilities of UKAR.
As a result, UKAR said it would now seek expressions of interest and also explore how to divest itself of the mortgage servicing activities which were provided by B&B.
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