UK government further cuts stake in Lloyds

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The government has sold a further portion of its stake in Lloyds Banking Group amid expectations it could soon start selling shares in Royal Bank of Scotland.

The taxpayer stake in Lloyds has now fallen to below 14% from the 43% it stood at when it was bailed out with £20bn of taxpayer funds following the 2008 financial crisis.

Chancellor George Osborne said: “It’s fantastic news that we’ve sold more shares in Lloyds bank, taking the total recovered to almost £14bn. I am determined to build on this success, and to continue to return Lloyds to the private sector and reduce our national debt.”

He is facing calls from investors in the City to step back from an election promise to hold back shares for a retail offering to shareholders. “I do think it would be an awful lot simpler and less costly to sell the remainder of the shares in the market than execute a retail sale at some fixed discount,” Richard Buxton, head of UK equities at Old Mutual Global Investors, told Reuters.

After two placings of shares with institutional investors which began two years ago, the government has been selling shares by “dribbling” them into the market. This new trading plan was launched in December 2014 and will end no later than 31 December 2015.

The latest reduction in the stake followed the publication of Lloyds’ results on Friday, which showed the continued impact of the payment protection insurance (PPI) mis-selling scandal. Lloyds has now set aside more than £13bn to pay for claims, and has warned that that figure could rise.

Even so, after the stake reduced further, Lloyds said: “This reflects the hard work undertaken over the last four years to transform the group into a simple, low-risk and customer-focused bank that is committed to helping Britain prosper.”

The chancellor is also keen to start reducing the 79% stake in RBS, which received a £45bn taxpayer bailout during the crisis. His advisers are currently deciding whether to recommend a sale, following its half-year results on Thursday. RBS’s shares were among the biggest fallers in the FTSE 100, losing 1.4% to 337p amid speculation that a sell-off is imminent.

Osborne told the City in June that he wanted to sell RBS even though the shares are trading at less than the 502p average price paid for them. He said profits on selling other bailed-out banks would outweigh the loss on any RBS sale.

Powered by Guardian.co.ukThis article was written by Jill Treanor, for theguardian.com on Monday 3rd August 2015 09.26 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010

 

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