Osborne looks to raise £3bn by selling down Lloyds stake

Chancelllor George Osborne launches a trading plan for selling off the stake in Lloyds Banking Group after it narrowly passed a Bank of England stress test. Picture: PA

Taxpayers still own just under 25 per cent of the business, which also includes Halifax, after its £20 billion rescue during the financial crisis and the latest sale could see that cut to just under 20 per cent.

Osborne has launched a trading plan which will see shares gradually sold in the market over time “in an orderly and measured way” and said sales “may commence in coming days”. The plan will be in place for approximately six months.

Shares will not be sold below the average price which the previous UK government paid for them, which was 73.6p.

The Chancellor said the move was “the next step in returning Lloyds to private ownership”.

“The trading plan I’m initiating is made possible by our long-term economic plan which is delivering a more secure and resilient economy. It is another step in reducing our national debt and in getting taxpayers’ money back.”

The government said previous sales of its stake in Lloyds had raised £7.4bn, reducing the taxpayer share from around 40 per cent to just under 25 per cent.

It said the announcement followed advice from UK Financial Investments (UKFI), which controls the state’s investments in bailed-out banks including Lloyds and Royal Bank of Scotland.

The sale will see up to about 5 per cent of the group sold, or around a fifth of the Treasury’s stake, raising just under £3bn.

Officials have told Morgan Stanley, which is handling the sale, that no more than 15 per cent of the “aggregate trading volume” of the bank is to be sold over the duration of the trading plan. That would equate to up to around 5.4 per cent of Lloyds.

UKFI said it was possible that sales would not commence until the new year and that the plan will terminate no later than 30 June. Officials cautioned the size of the stake sold over the course of the trading plan could be smaller than 5.4 per cent, depending on trading conditions.

The form of share sale announced is different from previous placings of a large tranche of Lloyds stock on a single day. Those sorts of sales generally see a significant discount to the share price to attract investors to take up the offer.

Selling smaller chunks of Lloyds over a longer time appears to be an attempt to dispose of more of the government’s stake without having to cut the price.  The news came amid speculation that Lloyds was expected to win permission from the UK financial regulator to pay its first dividend since it was bailed out by taxpayers, according to a poll of analysts.

The majority believe Lloyds’ narrow passing of the Bank of England’s debut annual industry “stress test” on Tuesday has strengthened its case for paying a dividend for the first time since its rescue. The shares in Lloyds closed down 1.51p at 75.35p.