Osborne fires starting gun on sale of more Lloyds shares

The Treasury may begin selling off part of its remaining stake in Lloyds
The Treasury may begin selling off part of its remaining stake in Lloyds
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The Chancellor has fired the starting gun on another sale of shares in state-backed Lloyds Banking Group ahead of next year’s general election.

George Osborne said the Government will sell part of its remaining shareholding through a trading plan over the next six months.

Mr Osborne said: “I can confirm today that the Government is taking the next step in returning Lloyds Banking Group to private ownership.

“The trading plan I’m initiating today 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.”

Lloyds, which owns the Halifax and Bank of Scotland, received a £20.5bn bailout during the financial crisis of 2007 to 2009.

The Government still owns 25 per cent of the group, having so far raised £7.4bn through two share sales.

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

The Treasury has appointed investment bank Morgan Stanley to act as broker. It has been instructed to gradually sell shares over time in an orderly and measured way.

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

Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, told The Yorkshire Post: “I’m sure there’s a huge amount of politics involved in terms of just being able to recoup taxpayers’ money at a profit.

“I don’t think a significant profit is the key target - it’s simply returning the bank to the private sector.”

He added: “Lloyds continues to benefit from a recovering UK economy, the trajectory of which remains a major influence over the Government’s own sale process.

“For now, and with the resumption of dividend payments a positive background prospect, analyst consensus opinion continues to point towards a strong hold.”

Gary Greenwood, analyst at Shore Capital, said: “I assume the current market volatility means that the Government is fearful of trying to sell a large chunk in one go when it could fail.

“This gives Morgan Stanley license to drip stock into the market on their behalf as and when there is demand, providing they achieve a price above 73.6p.

“In an ideal world I think the Government would want to be out of Lloyds before the election, but much depends on the prevailing market environment between now and then.”

Financial markets have been hit by turmoil this week as traders react to plunging oil prices, currency routs and Western disinflation.

Lloyds is heavily exposed to the UK economy, which remains in growth mode in spite of turmoil in parts of the Eurozone.

Chief executive Antonio Horta-Osorio has turned around the lender’s fortunes since joining in 2011, returning the bank to profit.

Lloyds and its state-backed peer Royal Bank of Scotland scraped through this month’s debut annual stress test, proving they could withstand the Bank of England’s doomsday scenario of plummeting UK house prices and soaring unemployment, after both took pre-emptive measures to shrink their balance sheets and raise capital.

Lloyds has been in talks with the regulator for several months seeking permission to make a modest payout for the 2014 financial year.

It hopes to be able to make an announcement alongside its full-year results in February.