LONDON: Prepare for the Taxpayer to be stitched up as Britain cuts Lloyds stake as full privatisation looms

#AceFinanceNews – July.16: LONDON (Reuters) – Britain has cut its stake in Lloyds Banking Group by a further percentage point to under 15 percent, accelerating its drive to return the bailed-out lender to full private ownership.

The latest sale means the government has so far raised more than 13 billion pounds ($20 billion) from selling its shares in the bank, having pumped 20.5 billion pounds into Lloyds during the 2007/09 financial crisis leaving it with a 43 percent stake.

Finance minister George Osborne has said he wants to return Britain’s banking assets to the private sector at a faster pace and is also looking to sell at least three quarters of the government’s stake in Royal Bank of Scotland over the next five years.

Since last December, Britain’s shares in Lloyds have been sold on the stock market by Morgan Stanley through a trading plan that allows for regular disposals provided the price is above the government’s target of 73.6 pence per share.

That has enabled the government to accelerate the rate of selling its shares and its stake has fallen to 14.9 percent from 24.9 percent at the start of the plan.

The plan is scheduled to run until the end of the year but its success raises the prospect that UK Financial Investments (UKFI), which manages the government’s stake, may close it early in order to hold back shares to offer to private retail investors.

The final sale could see the government offer around 4 to 5 percent of Lloyds shares to retail investors at a discount to the market price and could take place next March, according to industry sources.

The value of the government’s remaining stake stands at 9 billion pounds, based on the current share price. At 1445 GMT, Lloyds shares were up 1 percent at 86.49 pence.

Osborne is determined to sell some of the shares to retail investors, mirroring the 1980s privatisation drive of then Prime Minister Margaret Thatcher aimed at encouraging ordinary Britons to invest in companies.

Lloyds is attractive to private investors because of the dividends it is expected to pay out in the coming years. Prior to its bailout, it was one of the highest dividend paying stocks in Britain, handing over half its profit to shareholders in 2005 and 2006.

The plans to return at least 50 percent of its sustainable earnings to shareholders and that could include extra one-off dividends, further increasing its appeal to retail investors.

Lloyds still faces outstanding issues that could yet cause a rethink to the sale plans, including a review of the industry by Britain’s competition watchdog and the mounting bill of compensating customers mis-sold loan insurance, for which Lloyds has already set aside 12 billion pounds.

(Additional reporting by Nishant Kumar; Editing by David Goodman and Mark Potter)

Britain cuts Lloyds stake as full privatisation looms


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