UK to sell Lloyds stock to institutions – not public

Philip Hammond

UK finance minister Philip Hammond said the British government will withdraw a planned retail sale of cut-price shares in Lloyds Banking Group to the general public due to “ongoing market volatility.”

Instead, the UK government will sell its remaining 9.1% stake in Lloyds worth roughly £3.6 billion to institutional investors via a “trading plan.”

Lloyds Banking Group includes Lloyds Bank, Bank of Scotland, Scottish Widows and Halifax.

Speaking in Washington, Hammond, the UK’s Chancellor, also said he had no plans to start selling shares in  Royal Bank of Scotland due to an investigation by the US Department of Justice into the alleged misselling of mortgage-backed securities and delays in the sale of RBS’ Williams & Glyn branch network.

Further, Hammond added that market conditions were not right for a sale of RBS shares.

The Treasury said the move to sell the remaining Lloyds shares to institutions was part of the government’s commitment to returning the state-owned banks to the private sector and to “get taxpayers’ money back.”

The UK government said it already raised around £16.9 billion for the taxpayer from previous Lloyds share sales.

The Treasury said a trading plan share sale to institutions “will ensure the government gets back all of the £20.3 billion that taxpayers injected into Lloyds during the financial crisis.”

Nonetheless, Ian Gordon, an analyst at Investec, told Reuters: “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 …

“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.”

Lloyds shares fell 4.5% to 52.50p.

The Teasury said the decision on Lloyds followed advice from UK Financial Investments (UKFI) that selling shares to institutions through the trading plan represented good value for money for taxpayers.

Hammond said: “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 as Chancellor.

“I have listened to the experts. Ongoing market volatility means it is not the right time for a retail offer.

“Our plan will get back all the cash taxpayers invested in Lloyds during the financial crisis and leave the bank in a better place to continue the crucial role it plays in supporting individuals, families and businesses up and down the UK.”

Lloyds was rescued with a £20.5 billion bailout during the financial crisis, leaving the UK state with a 43% stake, which it started selling off in 2013.

The Treasury said it will gradually sell the Lloyds shares in the market over the next year “in an orderly and measured way” and that the sale of shares could start in the coming days.

Morgan Stanley International will act as broker on behalf of the Treasury to execute the plan.