Public will not be offered Government’s shares in Lloyds says Chancellor

Lloyds Banking Group, Trinity Road, Halifax.
Lloyds Banking Group, Trinity Road, Halifax.

Chancellor George Osborne has ruled out a public offering of the Treasury’s remaining shares in Lloyds Banking Group ahead of the General Election.

The Treasury, which still owns 25% of the bank, is thought to have scrapped a public sale before May due to stock market volatility, geopolitical uncertainty and the time it would take to launch the public offering.

The Chancellor said in his Autumn Statement last December he wanted the taxpayer to have the opportunity to own shares in the bank.

The Treasury was left with a stake in Lloyds following its £20 billion rescue during the financial crisis, after it swallowed up troubled Halifax Bank of Scotland.

Taxpayers originally owned 43% of Lloyds, but this was cut following share sales to institutions to 24.9% earlier this year. The Treasury last raised £4.2 billion in March by selling shares at 75.5p to City investors.

But since June, Lloyds share price has fallen 6% as the stock market has become more volatile and geopolitical conditions have grown more uncertain.

In total, the Treasury has raised £7.4 billion from two sales of shares to investors.

The Scottish independence referendum in September, the presentation of Lloyds full-year results in February and the Budget in March further narrow the window of when the marketing for a large-scale sale to the public could go ahead, according to Sky News.

Lloyds has also said it will apply to the Bank of England’s stability watchdog, the Prudential Regulation Authority, to begin to pay dividends in the second half of this year after more than six years.

Sources close to the sale admit that any marketing of shares to the public will be more attractive once the bank has been cleared to make shareholder payouts.

However, the Treasury has not ruled out selling more shares to City institutions as these would be quicker to organise.

Hargreaves Lansdown analyst Keith Bowman said: “The timing would be tight for a public offering. But an institutional sale would be a smoother process, with previous sales passing off with few problems.”

Last month, Lloyds Banking Group posted a half-year profit of £863 million, despite setting aside another £600 million to cover mis-sold payment protection insurance.

Chief executive Antonio Horta-Osorio, who has cut costs and sold off assets at the bank, now calls the business “a normal bank”.

A Treasury spokesman said: “The Chancellor set out the Government’s approach to the state-owned banks in his Mansion House speech last year: we want to maximise support for the British economy, get the best value for money for the taxpayer and return the state-owned banks to private ownership.

“Any decisions on share sales will be determined by value for money and market conditions.”