Antonio Horta-Osorio eyes sale of stake in St James’s Place to boost reserves

Sources say the partly taxpayer-owned Lloyds could place its 60 per cent shareholding in St James’s Place Wealth Management with investors by the end of this year or during the first quarter of 2013.

Shares in St James’s Place, which largely caters for affluent customers, have leapt nearly a third in recent months amid resilient trading by the business despite continuing stock  market gyrations.

The stock closed on Friday at 398.5p, valuing the company at £2bn. Britain’s banks are understood to be running the rule over further potential asset disposals against the backdrop of the regulator, the Financial Services Authority (FSA), and the Bank of England believing industry balance sheets need further strengthening.

This is despite UK banks largely having strong core tier one capital ratios, which measure capital backing against loan books, being higher than most  European rivals.

The FSA is known to have written to Royal Bank of Scotland (RBS) – 82 per cent state-owned following the 2008 financial crash – asking it to at least consider a sale of its US retail bank, Citizens. RBS floated its Direct Line insurance subsidiary on the British stock market last month.

Analysts said yesterday that the amount of money Lloyds could get from a divestment of its St James’s stake would also be likely to ease regulatory concerns about when the bank could restore dividend payments to shareholders.

Lloyds, which inherited the St James’s stake when it took over HBOS in early 2009, was banned by the European Commission from paying dividends from January 2010 until January 2012 in return for the bailout that left the taxpayer with a near-40 per cent holding.

One analyst said yesterday: “St James has a good enough track record for there to be real optimism that a sale or placing of the stake would raise a tidy sum for Lloyds. It would not be a difficult sell.

“Antonio Horta-Osorio [Lloyds’s chief executive] is also streamlining and simplifying the bank, and this could also be portrayed as a strategic step in that direction quite apart from the financial benefits involved.”

It is also reported that a number of key existing shareholders in St James’s would be interested in raising their stakes.

A Lloyds spokesman declined to comment on the “speculation”. He added: “St James’s Place is a good business that is performing well and we are comfortable with our shareholding.”

St James’s Place was set up in 1991 by Sir Mark Weinberg and Mike Wilson, the former management team at Allied Dunbar, backed by Lord Rothschild.

The current chief executive of St James’s, David Bellamy, is believed to be in favour of a clear statement of intent from Lloyds as to whether the subsidiary has a long-term future in the bank or should prepare for independence.

The consideration of a divestment of the stake is being led by Lloyds’s director of strategy, Antonio Lorenzo.