UK Financial Investments (UKFI), which manages the government’s stake in the group, reduced its holding by another percentage point to 5.95 per cent.
This sees it overtaken by global asset management giant BlackRock as the largest investor in the bank, which also owns Edinburgh-based Bank of Scotland, Scottish Widows and Halifax.
The sale – all proceeds of which will be used to reduce the national debt – is the latest in a string of share sales in Lloyds by the government, which said in October it hoped to offload its remaining stock within a year.
Its stake was originally 43 per cent via its £20.3 billion taxpayer bailout in the financial crisis, with more than £18bn since returned to the state.
Lloyds boss António Horta-Osório said news that the government is no longer its largest shareholder was a “milestone” in its return to full private ownership, “returning taxpayers’ money at a profit”.
Chancellor Philip Hammond ditched plans for a share sale to the public in October, opting instead to offload the holding to institutional investors.
He said restoring Lloyds to the private sector “and recovering all of the cash the taxpayer injected into the bank during the financial crisis is a priority for the government”.
However, Jasper Lawler, senior market analyst at LCG, said that UKFI selling down its holding in Lloyds again “simultaneously highlights the relatively weak position of Royal Bank of Scotland and puts it next in line for shares to be sold”.