Osborne kicks off Lloyds sale
Published 16/09/2013 | 19:06
The Government has pulled the trigger on the sale of its stake in Lloyds Banking Group in a major milestone for the part-nationalised lender.
The Treasury will sell 6% of the bank to big institutions, cutting its stake to 32.7% from 38.7%, which could net millions of pounds of profit for the taxpayer.
Chancellor George Osborne kicked off Lloyds' re-privatisation almost five years after its disastrous acquisition of Halifax Bank of Scotland left the bank needing a £20 billion taxpayer bailout .
Shares in Lloyds have soared to three-year highs in recent days on anticipation of an imminent sale. They closed at 77.36p today, above the 61p level at which the Government says it would break even on its bailout.
Based on today's closing share price, the sale would recoup £3.31 billion for the taxpayer.
However, UK Financial Investments (UKFI), which manages taxpayers' stakes in the banks, did not say what price it will sell Lloyds shares for, or what the sale will make.
Earlier this year Mr Osborne said the mortgage lending giant was ready to begin its return to private ownership.
A Treasury spokesman said: "UK Financial Investments today advised the Chancellor it would be appropriate to begin the process to sell part of the Government's shareholding in the Lloyds Banking Group. The Chancellor agrees with that advice and has authorised the process to begin.
"The Chancellor set out the Government's objectives for its shareholdings in the banks at the Mansion House speech earlier this year.
"We want to get the best value for the taxpayer, maximise support for the economy and restore them to private ownership. The Government will only conclude a sale if these objectives are met."
UKFI pulled the trigger on the sale of 4.28 billion shares after the stock market closed.
The public will not have a chance to buy Lloyds shares in the first wave, as UKFI will sell the shares to large institutions - although the public is expected to be able to participate in future share sales.
UKFI added it will not sell more shares for a further three months after completing the share placing.
The share sale comes ahead of the Conservatives' annual party conference starting on September 29, and follows a run of upbeat economic news.
In recent months shares have also consistently traded above the 73.6p average price paid at the time of the bank's £20.3 billion Government rescue.
The sale marks a milestone for Lloyds, which hailed its recovery earlier this summer after swinging out of the red with half-year profits of more than £2 billion.
On reporting the turnaround Lloyds boss Antonio Horta-Osorio said that it was up the Government to decide ''when and how'' to sell off its stake.
Mr Horta-Osorio said today: " I am pleased that the Government has been able to begin the process of selling its stake, and give taxpayers the opportunity to get their money back.
"I believe this reflects the hard work undertaken over the last two years to make Lloyds a safe and profitable bank that is focused on supporting the UK economy."
Chris Leslie MP, Labour's shadow financial secretary to the Treasury, said it is " vital that taxpayers get their money back" and this must be the Government's main consideration.
He said: "As Labour has consistently said any profits from the sale should be used to repay the national debt."
SNP Treasury spokesman Stewart Hosie said he welcomed the sell-off in principle.
He added: "Our concern was to make sure that the taxpayer receives what was given, so we will be paying particular attention to how the stock is priced, and any other mechanisms put in place which ensure the taxpayer is refunded."
UKFI has started a bookbuilding process to find buyers for the shares and said it will announce details on the sale price in due course.
Matthew Fell, director for competitive markets at business lobby group the CBI, said: " The move to return Lloyds to the market is good news for investors and customers and is testament to the successful recent management of the group.
"A Lloyds that can focus on serving the customer free from state ownership will help support the recovery."
James Barty, head of financial policy at Policy Exchange, said: "Returning Lloyds to private hands is a welcome step.
"The Government should now look to sell the remaining 33% via a mass distribution to taxpayers. That way the public as well as institutions could benefit from any further rise in the share price."
Mr Osborne said: "Five years ago the previous government used taxpayers' money to bail out the banks and I've been absolutely determined to get that money back for taxpayers so we can pay down debt.
"Today we have started to do that and it is another step in the long journey to repair what went so badly wrong in the British economy."
Shadow business secretary Chuka Umunna said the announcement of the sale was "a vindication" of the previous Labour government's bail-out of the banks.
" George Osborne will seek to take the credit for Lloyds' journey back to full private ownership - but the credit goes to Alistair Darling," he wrote on Twitter.
"The announcement of the start of the privatisation of Lloyds is a vindication of Alistair Darling's actions in government. The actions Alistair & others took in the last Labour government prevented catastrophe - now the taxpayer will start to get its money back."