The UK government has pressed the start button on the privatisation of its £20 billion stake in Lloyds Banking (LLOY). It has sold 6% of the lender to institutions for some £3.2 billion. The shares fall 2.1% to 75.7p.
The deal reduces the taxpayers’ stake to 32.7% from 38.7% after the shares were sold for 75p each, a 3.1% discount to Monday’s closing price.
This is only slightly above the 73.6p average price it paid for the bank following its disastrous takeover of troubled rival Halifax Bank of Scotland in 2008, making the government look desperate to start selling its shares in the lenders it bailed-out during the financial crisis.
The government made a £61 million profit from the deal, which could have been higher if it hadn’t been looking to score political points ahead of 2015’s elections.
Lloyds made a £2.1 billion pre-tax profit in the first half of the year compared to a £456 million loss a year earlier, which was derived from asset sales, falling bad debts and government bond sales, as we reported in August.
Analysts at Investec believe the timing of the share deal was ‘impeccable’, and that it is credible that all the shares can be sold before the election.
Taxpayers have longer to wait for the government to start selling down its position in Royal Bank of Scotland (RBS), despite the company making a £1.4 billion pre-tax profit in the first half. The bank is trading at 359.3p, far below the government's 503p break-even price.