£3.2bn Lloyds share sale paves way for second round but government makes only £61m profit

Government has sold a 6% share in Lloyds Banking Group

The City toasted the success of the first sale of taxpayer-owned shares in Lloyds Banking Group today after £3.2 billion worth of shares were snapped up by UK and US institutional investors.

The shares were sold in less than five hours last night through joint bookrunners BoA Merrill Lynch, JP Morgan Cazenove and UBS.

The placing price of 75p was a 3 per cent discount to last night’s closing price of 77.36p, which bankers described as a good result for what was the second largest share placing ever on the London stock market. Today the shares dipped 1.79p to 75.57p.

The sale reduces the Government’s stake in Lloyds from 39 per cent to 33 per cent and it has promised not to sell any more shares for at least 90 days.

The next share sale, which could come early next year, is expected to be open to private investors as well as institutions.

Although the sale of a 6 per cent stake was smaller than the 10 per cent which many in the City had predicted, advisers pointed out that it had been a political imperative that the first sale of shares from the £45 billion bail-outs of Lloyds and Royal Bank of Scotland was a success. The sale may also have been scaled back because investors face a flood of new bank shares, with Barclays’ £6 billion rights issue and the flotation of TSB next year.

Chancellor George Osborne welcomed last night’s shares sale, saying: “If you look at what has happened over the last 12 hours with Lloyds, you have investors from around the world investing in a British bank. That is a sign the British economy is turning a corner.”

Based on the average price of 73.6p a share which the taxpayer paid in three separate parts of the bailout during 2009, the Treasury has made a modest cash profit of just £61 million. But on the 63.1p price which UK Financial Investments (the holder of the taxpayer shares) prefers to use, which is after fees paid by the bank to the Treasury, the paper profit is £586 million.

While neither Lloyds nor UKFI paid any fees to the bookrunners they will have picked up about £16 million by charging commission of about 0.5 per cent to the buyers of the shares.

The success of the share sale was seen by many investors as testimony to the recovery of Lloyds under chief executive Antonio Horta-Osorio. He is in line for a £1.5 million share bonus, paid in five years’ time, provided the share price remains above 73.6p for the next month.

Investec analyst Ian Gordon, who rates Lloyds shares a sell with a price target of 65p, stuck his neck out, saying: “We regard the Government’s timing as impeccable, and it appears credible to suggest that it could yet be out in full by the election.”

While the first sale of Lloyds shares has made a modest profit, the much larger 81 per cent stake in RBS is still nursing a huge loss. The shares were down 7.5p at 359p today against an average bail-out price of 471p.

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Sales & Marketing Administrator

£16000 - £18000 per annum: Recruitment Genius: Ideal candidates for the role m...

Recruitment Genius: Digital Communications Manager

£25000 per annum: Recruitment Genius: A 6-month part-time contract (24 hours a...

Recruitment Genius: Trainee Vehicle Inspectors / Purchasers

£20000 - £40000 per annum: Recruitment Genius: Trainee Vehicle Inspectors / Pu...

Recruitment Genius: Trainee Vehicle Broker

£12000 - £18000 per annum: Recruitment Genius: A Trainee Vehicle Broker is req...

Day In a Page

Sepp Blatter resignation: The beginning of Fifa's long road to reform?

Does Blatter's departure mean Fifa will automatically clean up its act?

Don't bet on it, says Tom Peck
Charles Kennedy: The baby of the House who grew into a Lib Dem giant

The baby of the House who grew into a Lib Dem giant

Charles Kennedy was consistently a man of the centre-left, dedicated to social justice, but was also a champion of liberty and an opponent of the nanny-state, says Baroness Williams
Syria civil war: The harrowing testament of a five-year-old victim of this endless conflict

The harrowing testament of a five-year-old victim of Syria's endless civil war

Sahar Qanbar lost her mother and brother as civilians and government soldiers fought side by side after being surrounded by brutal Islamist fighters. Robert Fisk visited her
The future of songwriting: How streaming is changing everything we know about making music

The future of songwriting

How streaming is changing everything we know about making music
William Shemin and Henry Johnson: Jewish and black soldiers receive World War I Medal of Honor amid claims of discrimination

Recognition at long last

Jewish and black soldiers who fought in WWI finally receive medals after claims of discrimination
Beating obesity: The new pacemaker which helps over-eaters

Beating obesity

The new pacemaker which helps over-eaters
9 best women's festival waterproofs

Ready for rain: 9 best women's festival waterproofs

These are the macs to keep your denim dry and your hair frizz-free(ish)
Cycling World Hour Record: Nervous Sir Bradley Wiggins ready for pain as he prepares to go distance

Wiggins worried

Nervous Sir Bradley ready for pain as he prepares to attempt cycling's World Hour Record
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific