Lloyds sell-off begins: huge demand for 6% share stake
UK government's sale raises £3.2bn as uptake in bank's shares shows City has 'come back to life'
THE UK government has raised £3.2bn after selling a 6 per cent stake in Lloyds Banking Group, signalling the start of the bank's long-awaited privatisation.
The sell-off marks a momentous turnaround in the UK's fortunes after the 2008 financial crisis. The sale, which cuts the government's stake in Lloyds from 38.7 per cent to 32.7 per cent, is the country's second-biggest share placing ever.
The stake in Lloyds is worth more than the expected market value of the entire Royal Mail, due to be privatised in the next few weeks. The government said the Lloyds sale would reduce the national debt by £586m.
The first tranche of shares was sold last night for at least 75p each, reports the Financial Times. This was a 3 per cent discount to Monday's closing price of 77.36p, but 1.8 per cent above the average price the government paid in 2008.
BBC business editor Robert Peston says that, based on current share prices, taxpayers should "more or less" get their money back. "During the eurozone banking crisis of 2011-12, getting our money back looked an impossibility," he said.
Lloyds' recovery has rapidly gained paced this year when it finally announced a return to profit, five years after its £21bn government bail-out. In August, the bank reported profits of £2.1bn in the first half of the year, compared with a loss of £456m in the same period in 2012. Its shares have soared more than 90 per cent in the past 12 months.
Last night markets reported a swift take-up of the new share tranche, with one US hedge fund said to have submitted a $1bn order. "Investors are making a call on the UK," one banker told the FT. "This level of demand would not be there if people weren't confident in the UK's broader economic recovery."
According to the Daily Telegraph, the volume of orders from American institutional investors and hedge funds is much higher than expected. City AM's Allister Heath said the "vast demand" shows the City has clearly turned a corner: "The UK and London are finally coming back to life, and not a moment too soon." ·