UK plans Lloyds share sale

File picture: Reuters

File picture: Reuters

Published Oct 5, 2015

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London - Britain's finance ministry said it will sell at least 2 billion pounds ($3 billion) worth of shares in Lloyds Banking Group to private retail investors in spring 2016 to return the bank to full private ownership.

The sale is set to be the biggest privatisation in Britain since the 1980s, when Margaret Thatcher's government sold 3.9 billion pounds worth of shares in British Telecom and 5.6 billion pounds worth of British Gas shares.

As well as raising money to pay down Britain's debt, those sales aimed to encourage ordinary Britons to invest in the stock market, an aspiration shared by the current Conservative government, which gathered for its annual party conference in Manchester on Sunday.

“This final sale will be the biggest privatisation in over 20 years and I don't want all those shares to go to City institutions. I want them to go to members of the public,” finance minister George Osborne told Sky News on Monday.

Market sources say the shares are expected to be attractive to retail investors because of the high dividend yield they are expected to offer in the coming years.

The bank was one of the biggest dividend payers in the FTSE-100 before its 20.5 billion pound taxpayer-funded bailout during the 2007/09 financial crisis, which left the government holding a 43 percent stake.

Lloyds, which already has more retail investors than any other stock in Britain's FTSE-100 index, paid its first dividend since its bailout earlier this year and is expected to ramp up payouts over the next 2 to 3 years.

“The buoyant interest in this share sale will only now accelerate with the terms finally on the table,” said Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, which has 727 000 private clients.

Shares in Lloyds were up 1.5 percent at 07h30 GMT.

The Lloyds shares will be offered to retail investors at a discount of 5 percent to the market price, with a bonus share for every 10 shares for those who hold their investment for more than a year. The value of the bonus share incentive will be capped at 200 pounds per investor, the Treasury said.

People applying for investments of less than 1 000 pounds will be prioritised, the finance ministry added.

Britain's government has recouped almost three-quarters of the taxpayer cash used in the rescue of the bank through sales of shares to institutional investors since September 2013. It now owns just under 12 percent of the lender.

Before this year's national election, Osborne said he would look to sell part of the government's stake to private investors if the Conservative Party won a majority.

Osborne is pressing ahead with the sale, seen as a symbol of Britain's recovery from the financial crisis, despite mild opposition from some of Lloyds institutional shareholders, who have suggested the government could avoid unnecessary costs to the taxpayer if it continued to sell down its stake on the market.

The announcement comes after Britain's financial regulator said on Friday that it intended to set a 2018 deadline for people to claim compensation for mis-sold loan insurance. That decision was seen as positive for Lloyds, which has already set aside 13.4 billion pounds to compensate customers, more than any other bank.

Goldman Sachs is advising the government on the retail sale.

REUTERS

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