PUBLIC funds used to rescue Lloyds Banking Group during the financial crash five years ago are to be clawed back for the first time after the government announced the start of a long-awaited share sale scheme.
UK Financial Investments (UKFI), the Treasury unit that manages the government stakes in Royal Bank of Scotland and Lloyds Banking Group, said it would sell 6 per cent of the issued share capital of Lloyds.
This would be worth £3.3 billion based on last night’s Lloyds closing price, and take the taxpayers’ stake in the UK’s biggest retail bank – it holds nearly a third of current accounts and mortgages – down from 38.7 per cent to 32.7 per cent.
In June, Chancellor George Osborne announced that the government was preparing to sell its stake.
In a statement last night, the Treasury said: “We want to get the best value for the taxpayer, maximise support for the economy and restore them to private ownership.”
Shares in the bank closed yesterday at 77.36p – above the 63.1p level at which the government says it would break even.
At present, the shares scheme is not open to the general public and is only on offer to institutional investors.
Big firms will say how many of Lloyds’ shares they want and at what price. Then the government will examine these offers, decide on a price and divide up the shares, with the revenue being returned to the public purse.
Stewart Hosie, the SNP’s Treasury spokesman, said: “Our concern has always been the taxpayer must get their money back. We will be paying particular attention to how the shares in Lloyds are priced to ensure the taxpayer does not lose out.”
It is thought the sale could happen by the time the market opens today, with sources saying the price would be at a “very tight discount” to the closing price.
Lloyds, whose bailout cost the state £20bn after its disastrous takeover of HBOS five years ago, is seen in the City as much farther down the path in getting back completely into the private sector than RBS – where the taxpayer stills holds 81 per cent.
Shadow Labour financial secretary Chris Leslie said: “It’s vital that taxpayers get their money back and this must be the prime consideration in the sale of the government’s stakes in the banks. And as Labour has consistently said, any profits from the sale should be used to repay the national debt.”
Yesterday’s announcement was welcomed in the City.
Simon Willis, banking analyst with broker Daniel Stewart, said: “This is a move that makes sense because Lloyds is perceived as being well down the road to recovery.”
Roger Lawson, chairman of the UK Individual Shareholders Society, said he believed retail investors would be disappointed at the lack of a wider Lloyds’ share offering.
“I can see UKFI’s reasoning for practical reasons,” Mr Lawson said. “It’s disappointing for small investors, but it is far easier for UKFI and its financial advisers to negotiate with a few institutions. And an institutional placing also is a lot less costly.”
The sale will be seen as a vindication for Lloyds’ chief executive, Antonio Horta-Osorio, who has restored the bank to profitability since his appointment in 2011.
“I believe this reflects the hard work undertaken over the last two years to make Lloyds a safe and profitable bank that is focused on supporting the UK economy,” he said.