Lloyds share price: Government set for £2.7bn profit from stake sale

on Aug 9, 2016
Updated: Oct 21, 2019

The Treasury could pocket as much as £2.7 billion in profits if it sold its remaining stake in Lloyds Banking Group (LON:LLOY), City A.M. has reported, quoting new research by Hargreaves Lansdown. The news comes as a report in The Times suggested that the new government was likely to permanently abandon plans to offer shares in the bailed-out lender to retail investors at a discount.

Lloyds’ share price has been steady in early morning trade, having gained 0.27 percent to 54.70p as of 08:19 BST. The advance is in line with gains in the broader market, with the blue-chip FTSE 100 index currently standing 0.15 percent higher at 6,819.66 points. The group’s shares have lost about a third of their value over the past year, and are down by a quarter in the year-to-date.
City A.M. reported yesterday that an analysis by Hargreaves Lansdown had discovered that thanks to dividends, fees received for underwriting loans and previous share sales at higher prices, the government could turn a profit of £2.7 billion if it sold its remaining stake in Lloyds at current share prices. The Treasury, which pumped more than £20 billion in the bank during the financial crisis, has been holding on to its nine-percent stake, with Lloyds’ shares trading well below the taxpayer’s break-even price of 73.6p.

Since 2009, however, the government has made around £16.6 billion selling off its shareholding, has already or is due to receive dividends of £373 million, and received £2.9 billion in fees from the bank. By Hargreaves Lansdown’s calculations, it is therefore only £488 million short of recouping everything it initially put in for the bailout.
“The government has now made enough money from the Lloyds bailout that it can comfortably make good on its promise to offer shares to the public, while still making a tidy profit for the Treasury,” Laith Khalaf, senior analyst at Hargreaves Lansdown, said, as quoted by City A.M. “However the changes to the Cabinet following the referendum have raised questions over whether the government still intends to proceed with the public offer of Lloyds shares.”
The comments came amid news that new Chancellor of the Exchequer Phillip Hammond was likely to permanently abandon the ‘Tell Sid’ offer announced by former Chancellor George Osborne during the Conservative Party conference in October last year.
As of 08:39 BST, Tuesday, 09 August, Lloyds Banking Group share price is 54.65p.