U.K. to Launch Retail Sale of Lloyds Shares -- 3rd Update

By Max Colchester 

LONDON--The British government on Monday said it plans to sell at least GBP2 billion ($3.04 billion) worth of shares in Lloyds Banking Group PLC to the general public next spring as part of a broader move to sell its stake in the bailed-out lender.

The government, which said it intends to fully exit its Lloyds position in the coming months, said proceeds of the share sale to retail investors would be used to pay down national debt.

The U.K. Treasury said members of the public would be offered a discount of 5% of the market price when buying shares and that a bonus share would be awarded for every 10 shares for investors who hold on to the stock for more than a year. Investors buying less than GBP1,000 of shares will be prioritized.

Shares in Lloyds rose about 1.7% in early trading in response to the news.

Lloyds was bailed out by U.K. taxpayers during the financial crisis, with the government injecting about GBP20 billion to take a 43% stake. The government started selling its shares in Lloyds in late 2013 and now holds just under 12% of the bank. The government hired an investment bank to drip-feed shares back into the market at a price above what it paid to bail the lender out, a move that significantly reduced its stake. In total the government has recouped GBP15 billion from sales of Lloyds stock.

The share trading plan is set to run until the end of the year. If the government continues to sell Lloyds shares at the current rate it will be left with around GBP4.5 billion invested in the lender. Next year's retail offer would likely be accompanied by a sale to institutional investors, so that the Treasury can fully exit Lloyds.

Advisers to the government have long been skeptical about the practicality of selling shares to the public. Public offerings are long and complex leaving potential shareholders open to large swings in the share price. Lloyds also has already got 2.7 million shareholders, one of the largest shareholder bases in the FTSE 100.

However, the government has been under pressure to share some of the upside of its vast bank privatization plan with the general public, not just institutional investors.

Lloyds, which has a dominant position in the U.K. retail banking market, has been cited by analysts as potentially a big dividend payer. Its U.K.-focused retail business is also favored by investors over other banks with a wider array of businesses spread out over different geographies.

In a statement Lloyds said it noted the government's decision to sell part of its stake to the public.

The government said there will be a nationwide advertising campaign to raise awareness of the sale.

Razak Musah Baba contributed to this article.

Write to Max Colchester at [e-mail]

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October 05, 2015 07:41 ET (11:41 GMT)

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