Tuesday, 28 June 2022

Lloyds back in private ownership as government sells out


LONDON: The high street bank said last week the Government’s stake had been reduced to 0.25% and the UK taxpayer was set to make at least a £500 million profit from the final sale. It is understood the Government’s final tranche of Lloyds shares have now been sold, with an official announcement set to be made when the regulatory news service opens at 7am on Wednesday.

Speaking at the bank’s annual general meeting on Thursday, chief executive Antonio Horta-Osorio said a return to private ownership represents a “major milestone” in efforts to turn the bank around from the “crisis” it faced a few years ago. At its peak, Lloyds was 43% owned by the state after the Government spent £20.3 billion of taxpayers’ cash to bail it out during the banking crisis.

The Government had mulled plans to shed its remaining stake in Lloyds through a retail sale, but former chancellor George Osborne halted the attempt in January 2016, blaming market turbulence. The idea was eventually ditched altogether by current Chancellor Philip Hammond in favour of a drip-feed sale to institutional investors through a trading plan, with any profits made being used to pay down the deficit.

Lloyds emerged as a key player in the Government’s handling of the credit crunch despite being a domestically-focused bank with only a small exposure to the collapse of the sub-prime mortgage market that battered funds on either side of the Atlantic. Problems emerged for the lender after former prime minister Gordon Brown cleared the way in 2008 for it to make a £12 billion takeover tilt for HBOS to help shore up the sickly firm’s balance sheet and prevent a full nationalisation.

However, these best laid plans came unstuck when it became clear that HBOS had saddled Lloyds with heaps of toxic assets stemming from risky bets made by HBOS on commercial property during the boom years. To ensure its future, the Government upped the bailout funds pumped into Lloyds to £20.3 billion, lifting its stake to 43%.

While the taxpayers’ technical buy-in price for the bank was 74p during the crisis, the amount is calculated in the books by the Treasury at 61p after including money paid by Lloyds in Government fees. Lloyds shares were valued at 70.2p when the London Stock Exchange closed on Tuesday.

The bank announced last month that it had doubled its profit in the first three months of the year amid a “sweet spot” thanks to the economy’s resilience since the Brexit vote. The lender posted a better-than-expected set of first-quarter figures, with pre-tax profits surging to £1.3 billion, up from £654 million a year earlier.

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