Lloyds Banking Group has sold about £500m of assets, raising hopes that the government might soon start selling down its stake in the state-rescued bank.
The lender, which is 39% owned by the taxpayer, announced that it has off-loaded its German life insurer Heidelberger Leben to private equity group Cinven and reinsurer Hannover Re for about $400m. In a separate sale, it raised $398m by disposing of a portfolio of high-risk loans to ELQ Investors II Ltd, a subsidiary of investment bank Goldman Sachs.
The sales will strengthen the bank's balance sheet and have helped to renew speculation that Lloyds will reinstate paying shareholders a dividend, while the stock market was already bracing itself for the government to start selling off part of its stake in the bank. Lloyds shares have been trading higher than the 73.6p average price at which the government bought its stake in the bank in 2008 and 2009, and closed on Wednesday up 0.06p at 73.86p.
Mike Trippitt, director of banking research at Numis Securities, said: 'In my view the sales take us a step closer to a 2013 dividend. It may only be an hors d'oeuvre, but I think they'll pay something in 2013. How does that all affect a government placing [of Lloyds shares]? It's all part of a virtuous circle of making sure the bank's capital is stronger and of selling off non-core assets. They now have to make sure they have got through the worst of things like PPI [payment protection insurance mis-selling]. What you don't want to do is sell stock at 75p then find there is another scandal.'
Lloyds has been aggressively selling non-core assets, raising $700m by off-loading wealth manager St James's Place, a portfolio of US mortgages and branches from its Spanish retail banking business.
In June, it was told by the Bank of England it still had to increase its buffer against potential future losses by a further $13.5bn. While Lloyds said that the sale of Heidelberger Leben will lead to a probable loss of approximately $515m in the group's accounts, the combined asset sales will boost Lloyds' core tier 1 capital by about $625m.
Stricter capital requirements for insurers have made life policies more expensive to underwrite, leaving owners of many smaller operators seeking to sell.
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