Share sale set to return Lloyds to private sector

By Simon Neville Business reporter, BBC News

The government is set to say its remaining shares in Lloyds Banking Group have been sold eight years after pumping in £20bn to save it.

The sale is expected to be announced on Wednesday by UK Financial Investments, which manages the government’s stake.

At the height of the financial crisis taxpayers owned 43% of Lloyds.

Its return to the private sector is in stark contrast with the other bailed-out bank – Royal Bank of Scotland – that is still 73% owned by taxpayers.

The government has been slowly selling down its stake in Lloyds for the past five years.

Ministers have claimed that all the public money used to buy Lloyds shares has been returned.

However, the true cost is disputed, with some critics claiming the lost interest has not been taken into account.

Others have argued that the heavy losses previously suffered by Lloyds also hit the government’s stake.

Either way, the £20.3bn of public funds used to buy the shares had already been recouped due to dividend payments made to all shareholders.

At last week’s annual meeting, Lloyds chief executive António Horta Osório told shareholders he expected the government to make at least £500m from the bailout.

The shares have been sold off by Morgan Stanley at below the 73.5p average price paid in the three-stage bailout.

But taking the dividend payments into account means the total £20bn outlay has already been repaid.

Former chancellor George Osborne had hoped to offer the shares at a discount direct to the public, with a campaign similar to the classic Tell Sid campaign for British Gas in the 1980s.

The turnaround has not been without pain. About 57,000 jobs have been cut at Lloyds as it returned to profitability.

The EU also forced the bank to sell 600 branches due to competition rules and £17bn was set aside to fund PPI misselling – the biggest bill for any of the banks caught up in the scandal.

But this year a £4.3bn profit – the biggest in a decade – finally allowed the bank to put its past behind it.

While the sale of the Lloyds stake marks a major turning point for the bank, taxpayers’ other bailed-out institution – RBS – remains firmly in government hands.

RBS was rescued with a £45bn bailout in 2008 and 2009 and has failed to turn a profit since.

The bank recently posted a ninth consecutive year in the red, with losses of £7bn, bringing total losses since the bailout to £58bn.

The lender still faces £5.9bn of charges related to historic misconduct issues and potential legal costs.

A £400m pot has also been set aside to compensate small business owners and customers of its controversial Global Restructuring Group.

The now-defunct division secretly tried to profit from struggling businesses, leaked documents showed last year.

 

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