LONDON (Reuters) - The British government will resume selling its residual 3.6 billion pound stake in Lloyds Banking Group (LLOY.L) after a break following the vote in June to leave the European Union.
UK Financial Investments Limited (UKFI), which manages the government’s stake in the bailed out bank, said it would relaunch a mothballed trading plan led by Morgan Stanley to try to return the bank to full private ownership over the next 12 months.
The plan means the shares will be offered in increments to institutional investors, with the first sales likely in the coming days.
It has recommended scrapping plans to sell some of those shares via a discounted offer to the general public, risking disappointing thousands of small investors hoping to cash in on growth at Britain’s biggest mortgage lender. “Returning Lloyds to the private sector is in the interests of the bank, taxpayers and the country as a whole. That is why exiting our stake in Lloyds in an orderly way and at the best possible price is one of my top priorities,” Finance Minister Philip Hammond said in a statement.
The government currently owns about 6.5 billion ordinary shares in the Lloyds, which represents about 9 percent of the bank’s shares.
After a 28 percent fall in the value of Lloyds stock so far this year, some analysts questioned whether restarting share sales in the middle of a banking share slump represented the best value for taxpayers.
“Having sold 11 billion shares at 81.4 pence over the last 18 months, it would appear that the Chancellor is now willing to sell them at a ballpark 50 pence, which I find slightly surprising,” said Ian Gordon, an analyst at Investec.
“Selling assets before the (November) Autumn Statement may play a part in his thinking but I thought he had removed those pressures by pretty much abandoning all plans to balance his budget,” Gordon added.
Lloyds shares slipped 5.5 percent to a two-month low of 52p by 1415 GMT.
Lloyds was rescued with a 20.5 billion pound taxpayer-funded bailout during the 2007-09 financial crisis, leaving the state holding 43 percent.
So far the government has recouped about 16.9 billion pounds after the finance ministry began selling off its stake in 2013.
In January, the government posted a planned sale of shares in Lloyds due to turmoil in global financial markets.
Hammond himself has stopped short of scrapping an eagerly anticipated share sale to the public but few investors and analysts expect the offer to be revived, especially if the trading plan goes well.
That would break with the Conservative government’s previous commitment to offload the shares in one of biggest public privatisations in Britain since the 1980s, when Margaret Thatcher’s administration sold shares in British Telecom and British Gas.The decision comes as the government faces increased pressure to recoup the 9 billion pounds it said it planned to gain from selling stakes in Lloyds and fellow state supported lender Royal Bank of Scotland (RBS.L) this year.
Earlier this week, the government also announced plans to restart the sale of almost 16 billion pounds of Bradford & Bingley mortgage loans, offering a further sign of renewed confidence in the economy.Lloyds Chief Executive António Horta-Osório welcomed the decision, saying it will help return the bank to private hands.
Additional reporting by Noor Zainab Hussain in Bengaluru; Editing by Adrian Croft/Keith Weir