The government is to sell at least £2 billion worth of shares in bailed-out lender Lloyds Banking (LLOY) to retail punters. Shares in the group improved 1% to 77.3p when the Treasury confirmed that the government's stake would be sold in 2016 at a 5% discount.

Ian Gordon, an analyst at Investec, believes the £2 billion was slightly lower than expected. The offer is part of the government's plans to sell its remaining 12% stake in the lender in the coming months with shares being sold to institutions.

As an incentive to lure private investors to the sale those investing less than £1,000 in the offer will be given priority. Investors choosing to hold their shares for at least a year will receive a bonus share for every 10 held, capped at £200.

The inducements are appealing, but investors should only buy the shares if they believe it will help meet their investment objectives.

Web - Lloyds Banking - 05 October 2015

There could be good news for those wishing to apply online for a slice of the part-state owned bank. Plans by the regulator to set a 2018 deadline for all payment protection insurance (PPI) miss-selling compensation claims could see Lloyds hold onto more of the profits that help pay the dividends. It has allocated £13.5 billion so far to cover the cost of these claims. Gordon expects another £1.5 billion of PPI claims before the proposed 2018 deadline.

Lloyds will pay 2.3p a share dividend for 2015 according to Gordon's forecast, the equivalent of a 2.9% yield.

The proceeds of next spring’s offer will reduce the £1.5 trillion national debt and a TV campaign is planned to publicise the sale.

Some £20 billion of tax-payers’ cash was injected into the bank after its disastrous takeover of Halifax Bank of Scotland in 2008 left it on the brink of collapse.

Issue Date: 05 Oct 2015