Government sells £500m Lloyds Banking Group stake

The UK government has sold another £500 million-worth of shares in Lloyds Banking Group, taking its stake in the lender to below 23 per cent.

The Chancellor was speaking on the Andrew Marr show. Picture: AP
The Chancellor was speaking on the Andrew Marr show. Picture: AP

The government has sold an additional £500 million-worth of shares in Lloyds Banking Group, cutting its stake to below 23 per cent compared with the 40 per cent rescue holding taken in the financial crash.

The latest share sale was on Friday and divulged by the bank yesterday, and comes after Lloyds’ first dividend to shareholders since the 2008 crisis that saw taxpayer lifelines also thrown to Royal Bank of Scotland and Northern Rock.

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Including the dividend – unveiled last month – and earlier taxpayer stake sales, the Treasury has now recovered about £8.5 billion – or 42 per cent – of the initial £20bn state bailout of Lloyds following its disastrous acquisition of HBOS.

The Chancellor was speaking on the Andrew Marr show. Picture: AP

The shares sold yesterday were at a level above the 74p average price the previous government paid for them – although 61p is registered in the Whitehall books for break–even.

The lower figure takes into account the money paid by Lloyds to the government in fees. On the stock market yesterday, the group’s shares dipped 1.06p to close at 80.37p.

Chancellor George Osborne said: “I am delighted that we’ve raised a further £500m for the taxpayer through the trading plan I launched in December.

“These sales are part of our plan to return Lloyds to the private sector and get taxpayers’ money back. The proceeds will be used to reduce the national debt.”

A pre-election sale of shares in Lloyds to the public – a so-called “retail offer” – was ruled out last year by Osborne.

The government has chosen to sell the remaining stock, which is held by the quango UK Financial Investments (UKFI), over time “in an orderly and measured way’” rather than through the large tranches that had been favoured previously.

It said in December that it hoped to sell off a further stake of up to 5 per cent in the bank between then and June to raise about £3bn.

The taxpayer stake is now 22.98 per cent, with the bank required to make a stock market announcement every time it crosses a one percentage point threshold.

Lloyds announced last month that it would pay a dividend for 2014 to its three million shareholders – the first since it was banned by the European Union from making payouts in return for its state aid. The dividend will provide the government with at least another £100 million this year.

The restoration of the divi came on the back of a four-fold rise in pre-tax profits to £1.8bn at Lloyds, which also owns Bank of Scotland, Scottish Widows and Halifax.

Group chief executive Antonio Horta-Osorio said the buoyant profits were further proof that the bank was a safer, more streamlined business focused on lending to UK households and smaller businesses. Horta-Osorio has also said that Lloyds’ restored cash generation should allow it to pay 50 per cent of sustained earnings to shareholders over the medium term, usually taken to mean three to five years.

The group is the most UK-centric of Britain’s five main high street banks, with 34 per cent of the current accounts market and 30 per cent of mortgages.

A Lloyds spokesman said: “Today’s announcement shows further progress made in returning Lloyds Banking Group to full private ownership and enabling the taxpayer to get their money back.

“This reflects the hard work undertaken over the last four years to transform the group into a low-risk and customer-focused bank that is committed to helping Britain prosper.”

One City banking analyst said: “These steady, incremental selldowns of the taxpayer stake show the progress it has made in profitability, and the shares are gradually being restored to City favour.

“Many investors now believe UKFI will be totally out of the Lloyds picture sometime in 2016.”