Treasury back in the black with its Lloyds stake

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Shares in state-backed Lloyds Banking Group yesterday climbed above the UK government’s break-even price, raising the prospect of a taxpayer share sale either later this year or in 2014.

Analysts said it was a significant psychological milestone and paved the way for the mooted UK government sell off of some of its 39 per cent holding in the bank.

Lloyds’s shares closed up 1.93p, or 3.2 per cent, at 62.84p, their highest level in two years. It compared with the 61.2p average price at which the UK government bought into the bank during the crisis.

Lloyds chief executive Antonio Horta-Osorio told investors at the bank’s AGM on Thursday that it expected to return to profit this year for the first time since 2010.

Shares in Lloyds have risen by 124 per cent over the past year, outperforming a 25 per cent increase in the FTSE 100, making it the best-performing stock in the blue chip index.

Any sale would be handled by UK Financial Investments, which manages the Treasury’s shares in Lloyds and Royal Bank of Scotland.

One source familiar with UK government thinking said it would want the Lloyds shares to be established at a level comfortably over break-even before it thought about selling, suggesting nothing imminent is likely.

One analyst said: “Getting above break-even price in the market is a milestone, but it is not the only game in town. The UK government has to decide how to create a good aftermarket for the shares it retains after it sells any initial tranche.”