Government lines up next phase of Lloyds exit

UK Financial Investments, the independent body which manages the government’s post-crisis banking stakes, has revealed it is moving ahead with the next phase of a taxpayer exit of Lloyds Banking Group, with the largest chunk yet of its holding to be sold before the end of June 2015.

Under the terms of the deal, Morgan Stanley will have discretion to sell down a stake of up to 15 per cent in the bank over the next six months. The government currently retains a stake of just below a blocking 25 per cent minority.

According to an official statement, the sales could start in the new year, with exact amounts to be determined by market forces and sales only going ahead if they are at least equal to the average purchase price paid at the time of Lloyds’ bailout in 2008 of 73.6 pence.

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At that price the shares would fetch around £7.9bn; at the current price of a little more than 76 pence per share the sale would raise more than £8bn.

Having already brought in £7.4bn through previous divestments earlier this year and last, the new sales would take the total raised to close to £15.5bn. With a remaning stake of close to 9 per cent, the government would be likely to secure profit on the original £20bn investment.

The deal is, though, an admission that the government will still be invested in the bank at the time of the next election, dashing the earlier hopes of George Osborne to have a good news story to take to the polls.

At the time of writing, Lloyds shares were 0.65 per cent down for the day at 76.2 pence.