Foreign wealth funds sound out Treasury on Lloyds deal

George Osborne's Mansion House speech mention of Lloyds sparked interest from sovereign wealth funds. Picture: Getty
George Osborne's Mansion House speech mention of Lloyds sparked interest from sovereign wealth funds. Picture: Getty
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SOVEREIGN wealth funds and private equity groups have sounded out the Treasury about buying a 10 per cent stake in Lloyds Banking Group.

The move follows Chancellor George Osborne giving a strong hint in his Mansion House speech recently that a sale of the government’s 39 per cent holding was on the cards before the 2015 general election. There was speculation last night that a sale of shares in Lloyds could take place next month.

It is understood Osborne has an open mind on a part-sale to a sovereign wealth fund or private equity, which analysts say could raise about £5 billion for the government as it seeks to cut Britain’s bloated national debt.

But the Chancellor is said to be determined it must represent clear value for the taxpayer following Lloyds’s £20bn state bailout in the financial crash.

“There is a Gordon Brown’s gold issue here,” a source told the BBC yesterday. This referred to the criticism of the former Labour chancellor when he was deemed to have sold Britain’s gold reserves too cheaply near the bottom of the market.

A Treasury spokesman declined to comment yesterday, other than to say “nothing had changed” since Osborne’s keynote City speech and the suggestion of approaches from sovereign funds and private equity was “speculation”. UK Financial Investments, which monitors taxpayer stakes in banks, and Lloyds both also declined to comment.

However, one banking analyst said: “The suggestion circulating about Osborne wanting to avoid any repetition of [Gordon] Brown’s mistake in selling gold hastily is interesting.

“The Treasury is known to be pretty sensitive on any echoes of that issue with the Lloyds selldown, and for memories of Brown to apparently come up in this context suggests there may be some authenticity behind these latest stories.”

Analysts said any one-off stake sale before a wider sale would almost certainly have to be above the Lloyds market price, which was 64.6p at yesterday’s close. That compares with the average taxpayer buy-in price of 61.2p.

They said that possible names in the frame for Lloyds shares could include the sovereign funds of Singapore or Norway, with the oil-rich, acquisitive Qataris also regularly touted as being keen on British assets.

In his Mansion House speech, Osborne said: “Lloyds is in a good position. Investor interest is growing. And shares are already trading at around the price where selling would reduce the national debt.”

He added: “We will only proceed if we get value for the taxpayer. And we have no pre-fixed timescale or method of disposal. For the first block of government shares, an institutional placement is likely to be the most effective way of managing risk and getting value.”

• Moody’s ratings agency has placed RBS’s credit rating under review as it awaits the outcome of the government’s study into whether to split the group into a “good” and “bad” bank.

Moody’s said: “The probability of losses to RBS creditors remains low. However, there is potential for further capital impairment and the government has clearly indicated that it will not put additional taxpayer capital into RBS. As such, the government could consider options that might result in a higher risk of loss to bondholders, particularly junior bondholders.”