Comment: Lloyds offer helps draw line under bank fiasco

LLOYDS Banking Group has made a steady recovery in trading terms in recent years following its massive losses after its taxpayer bailout in the financial crash. That recovery has been accompanied by gradually growing interest in its full re-privatisation as the government has been incrementally selling down the state’s stake. The momentum can only freshen with the firm terms on the table now for a £2 billion sale to retail investors following the previous drip‑drip sales to institutional investors in the City.

And the terms look reasonably attractive. The retail offer will see stock sold at a 5 per cent discount to the market price, and to prevent wealthy individuals cleaning up at the expense of the man in the street, anyone applying for less than £1,000 worth of shares will get priority.

Investors will be awarded a bonus share for every ten purchased in the offer – which is scheduled for next spring – if they hold their investment for more than a year. The bonus will be capped at £200.

This is sensible on the government’s part. Quite apart from making sure the ordinary person has a chance to benefit in return for the taxpayer money they helped pay in to stabilise a listing Lloyds after it bought HBOS at the height of the financial crash, it will also help provide a steady aftermarket in the shares going forward.

The last thing the government and Lloyds would want is volatility in the stock of the most UK-centric of the UK banking majors after it returns fully to private ownership.

Stability of both financial performance and stock market valuation will be a priority. This retail share offering should help provide that – and will also be a highly symbolic process, helping to bring a very difficult period for Lloyds and the whole banking sector to a close.

That perception will also be helped by the eventual selldown of the taxpayer stake in Royal Bank of Scotland, particularly as the government has indicated that, unlike with Lloyds, it is prepared to take some taxpayer losses on the price it receives for its RBS holding.

From the public’s point of view, going for the Lloyds shares might also been seen as a prudent use of their money.

Interest rates are likely to remain low by historical standards for some time yet. Compared with that, Lloyds has already started paying dividends again, and the shares are on a prospective yield of 4 per cent.