Part state-owned lender Lloyds Banking (LLOY) improved 2.1% to 66.01p on rumours that multiple parties are preparing bids to buy most of the UK government’s 39% stake in the bank.
Former trade minister and Standard Chartered (STAN) chairman Lord Davies is said to be leading one consortium. Davies is vice-chairman of US private equity firm Corsair whose European operations are understood to be working on a bid with asset management companies. Corsair has also been reported to be working with the investment arm of the Church of England on a bid for 316 branches of the other part-state-owned lender, Royal Bank of Scotland (RBS).
Additional interest has been reported in Lloyds Banking from sovereign wealth funds including parties from Singapore, Norway and the Middle East.
The UK government has made it clear it is open to offers for the bank rescued for £20 billion five years ago. In his Mansion House speech last month, chancellor George Osborne said the government was considering options for selling down its shares in the bank, which is currently trading above the government's 61.5p break-even price.
Lloyds has made a strong start to the year, reporting a £2 billion pre-tax profit for the first quarter, up from £280 million a year earlier. Yet these earnings were boosted by government bond sales and non-core disposals, together with bad debt declines and lower provisions for mis-selling financial products. Its core lending business grew by a modest 1% from the end of December.
Any major new shareholder in the bank would have to address an additional £8.6 billion needed to meet the Basel III minimum requirement of holding at least 7% of its risk weighted assets in cash. Lloyds said on 20 June that it would meet its capital requirements 'without recourse to further equity issuance or the utilisation of additional contingent capital securities'.