Rise in Lloyds’ Share Price Suggests Sale of Government’s Stake May Come Soon

on May 17, 2013
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Lloyds’ share price (LON:LLOY) has climbed above ₤0.61, which the UK government regards as its breakeven level, giving investors yet another sign that a sale of the taxpayers’ stake in the banking group could soon materialise.

As of 10.05 GMT on Friday, May 17 Lloyds stock was up 1.95 percent at ₤0.6210 after having touched a high of ₤0.633 earlier following remarks by chief executive Antonio Horta-Osorio at Thursday’s annual shareholders meeting in Edinburgh.
“We expect [the restructuring of the bank] to enable us to return to profitability this year and to grow our core business, to realise our full potential to deliver strong stable and sustainable returns for you, the shareholders, and to allow UK taxpayers’ investment in the group to be repaid,” Horta-Osorio told shareholders and pledged that the bank would pull out of tax havens where it was not conducting genuine business.

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The chief executive said that Lloyds had embarked on a systematic review of “so-called tax havens” after shareholder Anne Edmonds confronted him over why the bank was the seventh biggest user of such facilities. “I want to know when this will be stopped. Tax avoidance is legal and what Lloyds is doing is legal. But to me there is little difference between tax avoidance, which is legal, and tax evasion, which is illegal,” Edmonds said on Thursday. Horta-Osorio agreed with her comments and said that in the past year the bank had closed 60 of those companies, more than a fifth of the total. “We are going to close all of them unless there are strong business reasons for our customers to keep them there,” he said.

Lloyds, which is 39 percent state-owned following its ₤20 billion bailout in 2008, delivered this year an almost threefold increase in first-quarter profit as impairments for souring loans had dropped. According to industry sources quoted by Reuters, the UK government plans to start selling down its stake in Lloyds before the next general election due in 2015.

“2012 has been a year in which that possibility has been enhanced,” Lloyds chairman Win Bischoff, who will retire from the company by May 2014, said on Thursday. “We remain committed to operating as a wholly privately owned group, which is profitable, self supporting and dividend paying.”
**Government Sitting on a Loss With RBS**
Selling down Lloyds stake is a much easier task than selling down the 81 percent interest in Royal Bank of Scotland (LON:RBS), which the UK government accumulated after injecting €45.5 billion (₤38.4 billion) into RBS to keep it afloat during the financial crisis. The current paper loss on that stake stands at around €17 billion.

RBS’ share price rose on Friday by 2.35 percent to ₤3.2630 after the bank announced on Thursday a further 1,400 job reductions from its banking head office over the next two years. RBS has announced about 38,400 job cuts since its bailout and Finance Director Bruce Van Saun has said that the “vast majority are now behind us” without specifying how many more job cuts were likely.
!m[RBS Plans Further 1,400 Job Cuts Amidst Debate Over Ownership Structure](/uploads/story/2335/thumbs/pic1_inline.png)
The Times reported earlier this week that the Policy Exchange, a think-tank close to the UK government, was working on a plan which could see between 50 and 70 percent of the bank’s shares, worth an estimated ₤15 to ₤25 billion, offered to Britons (Britons Could Acquire RBS Shares Risk-Free )
**Lloyds share price was ₤0.6210 as of 17.05.2013, 10.05 GMT.**
**RBS share price was ₤3.2560 as of 17.05.2013, 10.05 GMT.**

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