Taxpayers looked set to claw back cash from the Lloyds Banking Group for the first time today after the bank's £4bn fundraising gained strong backing from investors.
Part-nationalised Lloyds - currently 43.4 per cent owned by the taxpayer - is raising cash to replace £4bn in Government-owned preference shares with ordinary shares.
The move is likely to raise around £2bn for the bank from other investors to help pay off the Government's preference shares.
These preference shares - issued during last autumn's financial crisis - cost it £480m in dividend payments every year.
The strong appetite for the fundraising, with 87% of the new shares sold, comes because the stock was on sale at well below the current market price.
If all shareholders had snubbed the move, the taxpayer's stake could have risen to 65 per cent.
City Minister Lord Myners told the BBC Radio 4 Today programme: "I think this is very real progress.
"To imagine, three months ago, that we could have raised primary equity for a major UK bank experiencing the sort of bad debts that Lloyds was announcing is extremely difficult.
"I think we have now moved into a new territory in which institutional investors are saying 'We now have confidence in UK banks, their capital is strong and they are clearly again lending and supporting the UK economy'. So it's good news.
"I think there is still a great deal to be done. The world economy is still in a very nervous condition, but there are some signs in areas traditionally regarded as leading indicators that the underlying economy is moving to a position where improvement can be envisaged."
Under the terms of the deal, the remaining 13 per cent of the shares will be sold in the open market, with any profits above the 38.43p offer price split among investors who did not take part in the fundraising.
Any shares not sold at this point will be bought up by the Treasury as underwriter and added to the taxpayer stake in Lloyds.
The results so far show that that Lloyds has been able to raise more than £1.7bn from investors outside of the Government.
While the price of shares was around half that of the current market value, the investor support will be welcomed despite the challenges facing the bank.
The extent of the support from Lloyds' army of around 2.8 million private shareholders - who together own just under 10 per cent of the bank - is less clear.
Lloyds is expected to crash into the red this year following more losses at struggling HBOS, which it rescued at the height of the crisis last autumn.
The takeover was branded "a disaster" at Lloyds' annual meeting in Glasgow on Friday and chairman Sir Victor Blank is to stand down.
The bank is also set to place £260bn in toxic debts - mainly from HBOS - into a taxpayer-backed insurance scheme to strengthen its finances.