Cautious approval for Lloyds share offer

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Cautious approval for Lloyds share offer

Russ Mould, investment director at AJ Bell, has said that the government’s proposal to offer discounted Lloyds Bank shares is a clever proposition, but investors should remain cautious.

The government is set to offer £2bn-worth of shares at a 5 per cent discount, and a bonus of one share for every 10 bought, provided they are held for at least 12 months.

Mr Mould said: “The structure looks quite clever. However, the bonus share plan will be capped at £200, and ultimately investors should only buy if they feel comfortable with the investment case for Lloyds.”

He added that growth was likely to be limited as the UK was a “mature and tightly regulated” market.

“The bulk of any returns is therefore likely to come from its dividend yield, and anyone looking to buy needs to be confident that analyst forecasts for a payout of around 3.9p a share in 2016 is both realistic and sustainable,” he said.

Liz Field, chief executive of the WMA, said: “This is great news for retail investors, and while we await the detail, we would encourage other companies, particularly those with a retail focus, to give private investors the opportunity to participate in their share offerings.”

Last month the government sold a further 1 per cent shareholding in Lloyds Banking Group, taking the total raised for the taxpayer to £15bn and leaving the government’s total shareholding in the banking group below 12 per cent.

Adviser View

Laith Khalaf, a senior analyst at Bristol-based Hargreaves Lansdown, said: “Wild horses could not drag investors away from this share sale, especially given the discount and the dividend stream Lloyds is expected to start churning out.”