The UK government has sold £4.2 billion worth of shares in Lloyds Banking Group to cut its stake in the country’s largest retail bank to under 25 per cent and putting it on course for a complete exit in the next year.
Finance Minster George Osborne said yesterday’s sale “represents good value for the taxpayer” and the proceeds would be used to reduce the national debt.
“It is another step in repairing the banks, in reducing our national debt and in getting the taxpayers’ money back,” Osborne said.
Britain’s taxpayers stand to make a slim profit on the £20 billion pumped in to rescue Lloyds in 2009, which analysts and bankers said should encourage the government to speed up its exit.
Banking sources have said another sizable sale is expected this summer or autumn and a full exit is possible before the general election in May 2015.
“Ideally, they want to be out before the next election but a lot depends on market conditions,” said Gary Greenwood, analyst at Shore Capital.
The next sale is expected to include an offer to retail investors, which sources familiar with the matter said will be easier to do once there is greater clarity over the prospects for Lloyds resuming dividend payments.
UK Financial Investments, the body that manages the government’s stakes in both Lloyds and Royal Bank of Scotland, said yesterday it sold a 7.8 per cent stake in Lloyds, or 5.6 billion shares, at 75.5 pence a share.
It marked the biggest ever share sale via the accelerated book building process outside of the US.
The sale, at a 4.6 per cent discount to Tuesday’s closing price, cut Britain’s holding in Lloyds to 24.9 per cent and gave a profit to the average 73.6p at which the government bought the shares.
The offer was 1.7 times covered at the sale price, a person familiar with the matter said. Half of the investors came from Britain, 30 per c ent from the US, 10 per cent from Asia and 10 per cent from continental Europe, the source said.
Britain began to offload its 39 per cent holding in Lloyds last September, when shares were sold at 75p apiece. That was seen as a milestone in the country’s recovery from the 2008 financial crisis, when taxpayers pumped a combined £66 billion into Lloyds and RBS.
The sale is a vindication for Lloyds’ chief executive Antonio Horta-Osorio, who has restored the bank to profitability since his appointment in 2011, simplifying the business to focus on lending to UK households and businesses.
“Lloyds has done the bulk of the hard restructuring work and in terms of looking like a normal bank, it is pretty much there and that’s reflected in the performance of the shares over the last 18 months and the valuation it’s on,” Greenwood said.
Lloyds shares were down four per cent at 76p by 0938 GMT, but have surged 58 per cent since the start of 2013 and trade on 1.5 times their book value, the highest valuation of any UK bank.
UKFI said it will not sell any more shares before June 23.