Lloyds sale: it's on

The government has fired the starting gun on the sale of Lloyds shares, selling 6% of the business for £3.2bn.

by Emma Haslett
Last Updated: 11 Nov 2013

Institutions who wanted to bag a bargain needed to get in quick: after the closing bell yesterday afternoon, the government officially announced its intention to sell off the first tranche of shares in Lloyds Banking Group. The shares - making up 6% of the company - were snapped up, raising £3.2bn for the government.

The sale leaves UK Financial Investments - the body appointed to oversee the assets the government acquired during the financial crisis - with a 32.7% stake. It will now hold off selling more shares for the next 90 days.

At this stage, the shares were only sold to institutional investors, ostensibly because it would have taken too long to provide the detailed prospectus needed to sell to retail investors. Taxpayers will inevitably call 'unfair', though: if everything goes to plan, Lloyds' share price will begin to rise pretty rapidly. So these may well be the cheapest shares that will be sold. Not really helping out the little guy, are they...

The 75p per share the government made is well above the 61p George Osborne regards as 'break-even level'. But although on the surface it looks like he got the 'good deal for taxpayers' he wanted, the cost of borrowing the money to buy the shares in the first place - as well as the real cost of locking government cash up in shares that never paid a dividend - it means the government has not made any kind of profit.

It's a good job our great leaders aren't in business: with balance sheets like that, they'd soon go to the wall...

Nevertheless - it's swift work by UKFI: just last week, Lloyds TSB was split into two banks (Lloyds and TSB, natch). The intention is to eventually float TSB independently - but for now, the government is keen to get its cash back on Lloyds itself.

Over the past few months, Lloyds has emerged as the swot of the UK banking sector: its half-year results, posted at the beginning of August, showed the bank had gone back into the black, with pre-tax profits rising to £2.1bn, while lending grew 1% to £3bn. Loan-to-deposit ratio also dropped, from 114% to 100%, while its core tier 1 capital ratio increased to 9.6% and is expected to hit 10% by the end of the year.

Meanwhile, RBS is also busy getting itself back on track. Reports suggest the bank is close to announcing the sale of 316 bank branches, which altogether serve 250,000 small businesses and two million retail customers.

Bidders had been narrowed down to a shortlist of three - but apparently a bid by W&G Investments, a company led by ex-Tesco finance director Andy Higginson (and the man behind Tesco Bank) that floated last month specifically to buy the branches, has been rejected. That leaves offers on the table from a consortium including Lord Davies and the Church, and one from private equity firms Blackstone and AnaCap.

There's something symbolic about this happening so close to the fifth anniversary of Lehman Brothers' collapse. We're not sure the government can claim to have finally fixed the economy - but in its own cack-handed way, things are beginning to look up...

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