Lloyds share price: Government’s share sale loses taxpayers £230 million

on Dec 19, 2013
Updated: Oct 21, 2019

iNVEZZ.com, Thursday, December 19: UK taxpayers lost millions on the government’s first sale of shares in Lloyds Banking Group Plc (LON:LLOY), the National Audit Office (NAO) has estimated, taking into account the cost of borrowing the money needed to fund the bank’s bailout in 2009. However, the watchdog’s analysis of the sale, which was published yesterday, was favourable. It concluded that the transaction had been “effectively managed” and had provided “value for money”.

In September, the government sold six percent of its stake in Lloyds to institutional investors, raising £3.2 billion.
In today’s London trading, Lloyds shares rose 2.16 percent to 77.67p as of 8:34 UTC.
**Right timing**
The government’s first sale of shares in Lloyds was managed effectively by UK Financial Investments (UKFI) and provided value for money, the NAO said yesterday in a statement.

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NAO head Amyas Morse commented that the UKFI had chosen the right time to conduct the operation.
“The sale took place when the shares were trading close to a 12-month high and at the upper end of estimates for the fair value of the business,” Morse said. “Furthermore, the share price in trading after the sale has remained steady.”
The government sold the shares for 75p apiece, three percent lower than the closing market price of just over 77p ahead of the offer. The discount was smaller than the average discount of just over four percent seen in the 10 largest comparable sales since 2008, the watchdog noted. The government paid 73.6p a share back in 2009.

NAO said that the decision to restrict the sale to institutional investors helped speed the process up and provided UKFI with enough flexibility to choose the best time for the transaction.

**Saving the finance system**
While Chancellor George Osborne said at the time of the sale that it represented a profit for tax-payers, the NAO found that taking into account the interest costs associated with the government’s 2009 bailout of Lloyds actually resulted in a loss to the UK of at least £230 million. However, the regulator concluded that the loss mattered little in the grand scheme of things. It said that the shortfall should be seen as “part of the cost of securing the benefits of financial stability during the financial crisis, rather than any reflection on the sale process”.

Speaking on the BBC Radio 4’s Today programme on Wednesday, Peter Hahn, a banking expert at London’s Cass Business School, voiced a similar opinion. He told the BBC that it didn’t matter how much the stake was sold for, as it “saved the financial system”.
Further disposals of the state’s stake in Lloyds are expected next year. The government still owns a 32.7 percent stake in the bank
**As of 10:32 UTC buy Lloyds shares at 77.23p**
**As of 10:32 UTC sell Lloyds shares at 77.22p**
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