Advertisement

Government looks to reduce taxpayer stake in Lloyds Banking Group

The Government is looking to shift around five billion ordinary shares in Lloyds Banking Group. Photo: AP Photo/Sang Tan

As I write a cluster of banks are busy ringing around the pension funds, insurers and other big City investors (including hedge funds), here and abroad, asking them how much they are willing to pay for shares in Lloyds Banking Group and how many shares they want.

Overnight, the Government is looking to shift more than five billion ordinary shares in Lloyds, simultaneously reducing the overall size of the taxpayer stake in the bank from 32.7% to 25%.

On the stock market in London this afternoon Lloyds' share price closed at 79 pence. The Treasury is unlikely to get that but it is banking on something similar.

The hope is that the sale will raise around £4.2 billion - we'll find out the precise number tomorrow morning.

Back in 2009, the Government bought £20 billion of shares in Lloyds, the National Audit Office calculates the average "in-price" paid was 72.2 pence a share.

Factor in the interest the Government paid, to raise the money it needs (much of it was borrowed) it's unlikely that the Chancellor will be able to claim he's made a profit.

The Government hopes to reduce the overall size of the taxpayer stake from 32.7% to 25%. Credit: Philip Toscano/PA Wire

However, as the National Audit Office also concluded in its assessment of the first phase of privatisation last September, any loss should be seen in the context of "securing the benefits of financial stability during the financial crisis".

That is to say, a multi-million pound loss in probably a price worth paying for the avoidance of banking Armageddon.

George Osborne will also be able to boast that he's on course to deliver on another pledge - to return the bank in its entirety to the private sector in time for the next General Election.

So why aren't we all being offered the chance to buy shares in Lloyds? Quite simply, the view seems to have been taken that queue would have been pretty small.

Last October there was a stampede for shares in Royal Mail, but Royal Mail is a company promising a dividend (no sign of that yet at Lloyds) and back then Russia's relationship with the rest of the world was somewhat better than it is today.

In his Mansion House speech last summer and again at the Autumn Statement, the Chancellor made it clear that "retail investors" (er, that's you and me) will get their chance but it's now unlikely to come much before autumn at the earliest.