Lloyds Banking Group said that the Government has reduced its stake in the bank to 15.9 per cent from 16.87 per cent previously, in a further step towards its full privatisation.
Lloyds was rescued during the 2007-9 financial crisis at a cost of £20.5bn to taxpayers, leaving the Government with a 43 per cent stake in the bank.
The Treasury began selling off its stake in September 2013 and Lloyds is on track to return to full private ownership in 2016.
It has so far raised around £12bn from the sale of Lloyds shares.
The Government has mandated Morgan Stanley to sell shares on the London Stock Exchange through a trading plan known as a “dribble out”. It stake has been cut from 24.9 per cent through the plan, which was launched last December and is due to carry on until the end of 2015.
The Government is expected to offer retail investors the chance to participate in an offer of several billion pounds worth of Lloyds shares next year.