The UK government has reduced its stake in Lloyds Banking Group to less than 4 per cent as the lender moves a step closer to full private ownership.
UK Financial Investments, which manages taxpayers’ stake in Lloyds, cut its holding by about one percentage point. It now stands at 3.89 per cent, with more than £19 billion being returned to government coffers since the lender’s £20.3 billion bailout.
We are in a good position to continue to reduce our shareholdingSimon Kirby
The move comes after the Bank of Scotland yesterday reported its highest full-year profit in a decade and announced a special dividend for shareholders on top of a boosted regular investor payout.
It is the latest in a series of share sales by the government, which said in October it hoped to offload its remaining shares in Lloyds within a year. All proceeds from the sale will be used to reduce the national debt.
The government has progressively sold down its original 43 per cent stake and Chancellor Philip Hammond ditched plans for a share sale to the public in October, opting instead to offload the holding to institutional investors.
Economic secretary to the Treasury Simon Kirby said: “Since the decision to sell the government’s stake in Lloyds we have now recovered over £19bn for the taxpayer.
“Lloyds’ strong annual results show that we are in a good position to continue to reduce our shareholding and recover all of the money the taxpayer injected into the bank during the financial crisis.”
Lloyds chief executive Antonio Horta-Osorio said: “We are pleased that Lloyds’ strong financial performance in 2016 has enabled the government to further sell down its stake in the bank to below 4 per cent.
“This means over £19bn returned to the taxpayer; and is alongside the further £2.2bn in dividends paid to our 2.5 million shareholders, as announced yesterday.”
The group revealed yesterday that profits more than doubled to £4.24 billion in 2016 from £1.64bn in 2015.
This was largely due to lower costs of compensation for payment protection insurance (PPI) mis-selling. Lloyds, which also owns Scottish Widows and Halifax, did not set aside any further cash for PPI, having taken a £1bn charge in the third quarter.
But it took another £475m provision in the fourth quarter for other so-called conduct charges, such as for packaged account mis-selling, taking its total conduct provisions for the year to £2.1bn.
Horta-Osorio said: “Our performance is inextricably linked to the health of the UK economy, which has been more resilient than the market expected post [Brexit] referendum.”
Lloyds has not far off a third of Britain’s current accounts and mortgages, and recently announced a £1.9bn deal to buy UK credit card business MBNA from Bank of America.
The lender said that it would lift the total dividend for 2016 13 per cent to 2.55p, and is also paying shareholders a special dividend of 0.5p.
Richard Hunter, head of research at Wilson King Investment Management, said: “Under the careful stewardship of Mr Horta-Osorio, Lloyds has transformed into something of a modern day success story in the aftermath of the financial crisis.”
The Lloyds boss added that the economic recovery of recent years, with reduced household debt and low unemployment, meant the UK was well positioned even though its decision to leave the EU “means the exact nature of our relationship with Europe going forward remains unclear and the economic outlook is uncertain”.
The bank said that on an underlying basis, profits fell 3 per cent to £7.9bn last year. Total income for the group also edged down to £17.5bn compared with £17.6bn the previous year.
A remuneration report released by Lloyds yesterday showed Horta-Osorio’s total pay package fell to £5.5m last year from £8.7m in 2015 due to a cut in his long-term shares award after the stock took a battering following last June’s Brexit vote. The incentive payout fell from £5.18m in 2015 to £1.58m last year.
But the chief executive saw his short-term bonus rise from £850,000 to £1.2m and his base salary will increase 8 per cent in 2017 to some £1.2m – the first raise since he joined in 2011. The overall Lloyds’ staff bonus pool is up 11 per cent at £393m.