Lloyds sell-off begins

17 September 2013

The government has begun the sale of its 38.7% stake in Lloyds Banking Group, selling 4.3 billion shares to institutional investors at a price of 75p each.

The 6% stake sold for £3.2 billion in total, generating a profit of £61 million for the Treasury. The shares were originally purchased at an average price of 73.6p each.

"That is a profit for taxpayers, and rightly so," said Chancellor George Osborne in the aftermath of the sale.

"The money will be used to reduce the national debt by over half a billion pounds."

He adds that having "investors from around the world investing in a British bank" is "a sign the British economy is turning a corner".

Although these shares were only sold to institutional investors, it is expected that at least a portion of the next tranche will be offered to retail investors.

Analysts reacted positively to the sale, with Investec's Ian Gordon commenting: "We regard the government's timing as impeccable, and it appears credible to suggest that it could yet be out in full by the election."

The government still holds a 32.7% stake in Lloyds, but will not sell any more shares for at least 90 days.

Analyst view

"From a Lloyds perspective, our view is that little has changed as a direct consequence of this transaction," says Gordon.

He adds that, unlike for Royal Bank of Scotland, many of the government's decisions have been "distinctly positive" for Lloyds, particularly the launch of schemes such as Help to Buy and Funding for Lending.

Although he maintains a "sell" rating on Lloyds, he is positive in his outlook for the company, concluding: "We see the tail-risks which attach to Lloyds as significantly diminished."

This story was written by our sister website Interactive Investor

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