Lloyds privatisation begins

Lloyds sign

So more or less on the anniversary of the collapse of Lehman Bros, which triggered the mother of all banking crises, the Treasury has begun the privatisation of one of the enormous banks rescued by taxpayers in the autumn of 2008.

Tonight the government is trying to sell 6% of Lloyds for around £3.3bn - which represents a bit under a sixth of our 39% stake in the bank.

Based on tonight's market price of Lloyds, of just over 77p, the Treasury should get back more or less the cash invested by taxpayers in Lloyds - which was 73.6p per share.

During the eurozone banking crisis of 2011-12, getting our money back looked an impossibility.

That said, we won't make a fat profit. And the National Audit Office will point out that when the cost of money is taken into account, taxpayers will make a loss.

There is one other important financial characteristic of this deal for the chancellor: it will show a "book" profit to the government of around £600m and will reduce the national debt by that amount.

The notional profit stems from what some would see as the eccentricities of how the government accounts are written, namely that the shares were included in the government books not at their cash price, but at the (lower) market price on the day of the purchase of shares being a legal reality.

However, for Lloyds, the big point is that it moves nearer to being back in the private sector. And even in this initial sale, many will say taxpayers will get their money back (at least in cash terms).

PS: These shares are all being offered to investment institutions. The next sale of Lloyds stock will also include an element aimed at retail investors.

UPDATE 20:35

My hunch is that the Treasury is likely to receive around 75p per share for the 6% of Lloyds it is selling - a small discount to the closing market price of 77.3p, and a slight premium to the cash price paid by taxpayers for the stake in 2008 and 2009.

Around 80% to 90% of the shares are likely to end up in the hands of British and American investment institutions, in a sale being conducted for the government by JP Morgan, UBS and Bank of America.

The potential buyers of the shares are being given a promise by the Treasury that it won't sell any more Lloyds shares for at least 90 days. Which means that part two of this privatisation cannot happen till the end of the year, at the very earliest.

As for when individuals can be expected to be offered shares in a retail offering comparable to Margaret Thatcher's "Tell Sid" privatisations, that cannot happen till after Lloyds publishes its annual report for 2013, to allow for the writing of a proper prospectus.

The annual report won't be available till February. Which implies that a share sale to millions of people can't and won't happen till some months into the new year, at the earliest.

Robert Peston Article written by Robert Peston Robert Peston Economics editor

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  • rate this

    Comment number 34.

    Eurows - iam a small shareholder also. i dont understand why you are saying 'shareholders should take the hit'. aswell as being a shareholder iam a taxpayer so really iam in the same boat as you but i happened to pay £12 for shares in HBOS back in the day. Just because we own the shares doesnt mean we should pay again. looking forward to shares reaching £12 again tho haha. think ill be 200 y/o.

  • rate this

    Comment number 33.

    Big B (#23) you got it SPOT ON. Brown used his friendship with Daniels to save his own neck by getting Lloyds (like you said who WERE very well run and had no exposure to all the big bad debts that the other struggling banks did) to stop HBOS from going under which would have caused mass panic in the country and cost Brown his job.They both should have faced punishment for their actions.

  • rate this

    Comment number 32.

    I see the Tory trolls are negatively rating those who disagree with this.
    It's The Emperors New Clothes' yet again.
    Abraham Lincoln said:..."you can't fool all of the people all of the time".

  • rate this

    Comment number 31.

    So we bailed them and will now sell only to people we "know" at a loss while the value is rising and predicted to rise futher?

    After always voting Tory will vote for the first party that will reset everything.

  • rate this

    Comment number 30.

    #9 + #10 I agree
    The share bail-out/purchase was entirely necessary at the time to preserve the banking industry - sell off must come in small parcels (above 73.6p) - I am sure that the taxpayer will more than get their cash back!
    In fact, in terms of overall taxpayer recovery - was there not a fee of £(2bn+?) paid to the government for a Bail-Out Insurance Scheme that Lloyds never used?

  • rate this

    Comment number 29.

    There were also hefty fees paid paid to the Treasury for the bailout facility.

  • rate this

    Comment number 28.

    22.Eurows - How have you or thousands of others suffered from the bail out of lloyds bank? - This country is in debt for bn's of ££'s left over from several governments spending more than we make..

    As a small share holder who's seen most the value of my savings go - i personally apologise for your suffering.

  • rate this

    Comment number 27.

    The national debt is around £1.2 trillion so £600 million is .05% I believe. Interest alone on the debt is about £43bn per year. So, it's better than a poke in the eye, but not much more than that.

  • rate this

    Comment number 26.

    Shares sold at the earliest opportunity where it could be argued the taxpayer "more-or-less" gets their money back though the National Audit Office will point out it's actually a loss? Why? Seems like a bad deal for the taxpayer. A loss here loss really is a loss. Nothing to do with Osborne needing cash as quickly as possible.before the election in 2015 is it?

  • rate this

    Comment number 25.

    Simply this privatization is a way for moneyed folk to make yet more money from the rest of us.

    Why else is it being done?

    What advantage does it offer to the rest of us?

    Will we suddenly get better banking services?

    A crystallization of rip off Britain.

  • rate this

    Comment number 24.

    I am assuming that the public, that bailed out and own 39% of Lloyds will also be offered shares at 77p at the next issue in line with what's been offered to the institutions...

  • rate this

    Comment number 23.

    Overall good news that Lloyds is in a position to be sold (and more sales in the future at hopefully a higher price) but I can't forgive Daniels & Blank for rolling over & having their tummies tickled by Gordon Brown & ruining a previously pretty well run (not faultless as PPI issues etc show) bank paying decent dividends. They don't care as they have nice fat pensions or other jobs (e.g. at CVC)

  • rate this

    Comment number 22.

    Graham A

    You are obviously a Lloyds shareholder.

    They should have lost their shares entirely. The shares are now increasing again in value and at some stage they will have lost nothing. Meanwhile thousands of people have suffered.

    Whose the idiot. Obviously me and not you.

  • rate this

    Comment number 21.

    18.Eurows - You sir are either an idiot or have no idea what you are saying, some people invested their savings in this bank at over £3 a share to see them drop to 32p.. Exactly what 'hit' should the share holders be taking,

    LLoyds did not make themselves bust, they inherited huge undisclosed debts from the Halifax.

  • rate this

    Comment number 20.

    Why the rush to sell them at just break even? If the shares are on the up then why not wait a while and bank a profit for the state and tax payers? Or is it because Gideon knows that his ponzi mortgage schemes will lead to another banking crash?

  • rate this

    Comment number 19.

    'That said, we won't make a fat profit. And the National Audit Office will point out that when the cost of money is taken into account, taxpayers will make a loss'

    Once again, our trust worthy bankers are invited to the Captains table whilst the rest of the crew are shoved to the fore to live on zero hard tack contracts, candles that cost a fortune and a sick bay that is a shambles.

  • rate this

    Comment number 18.

    I see the bankers and shareholders are on here in droves. Licking their lips at the prospect of making more money.

    The bankers should be in prison and the shareholders should have taken this hit.

    We should at least keep hold of these shares now until they at least double.

  • rate this

    Comment number 17.

    So now we know who really bailed out the banks. Not the government or general public but 'picklies'. Thanks picklies. Very kind of you.

  • rate this

    Comment number 16.

    graham im a tax payer and im getting sweet nothing and I bailed the banks out so who is the mug

  • rate this

    Comment number 15.

    Good news that we will make our money back but never again should taxpayers have to bail out banks.
    In the future, losses must go on shareholders and then bondholders. That's the only way to encourage good behaviour, not heads-I-win-tails-you-lose!


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