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, economics editor Article written by Robert Peston Robert Peston Economics editor

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  • rate this
    +1

    Comment number 54.

    52. John_from_Hendon

    You are contradicting yourself. If the banks are bust, as you claim, then surely it makes sense to get the money back now.

  • rate this
    +4

    Comment number 53.

    UKgov’s motto for re-organising UK business and industry since 1945:

    If you have a poison chalice (like HBOS), make some unfortunate (Lloyds) drink from it and call the consequence consolidation.

    Selling now, UKgov may appear to break even and 'investment institutions' may be buying in to Lloyds at a favourable rate. Should UKgov wait longer?

  • rate this
    -5

    Comment number 52.

    So the big banks (that are actually bust) have been told to use some of the FREE QE money that they get from the Bank of England to 'BUY' (on the cheap one suspects) a bit of another mega banks that happens to be presently partly owned by the people.

    Who will pay for this - why, THE PEOPLE - US as usual!

    If it looks like a con & smells like one (just before the Tory Conference too!) it is a con.

  • rate this
    +1

    Comment number 51.

    @46 EF
    Yes, the Govt got that money. Where did the Banks get it from?

    Robert has outlined the sale on the 6pm radio news & made amends. £600m off the Debt but a real-terms loss for ... the taxpayer. I seriously doubt we will see that money back where it originally came from.

  • rate this
    -4

    Comment number 50.

    Banks are the epitome of the something for nothing culture.

    They and their shareholders hold the rest of us to ransom. In order that we avail ourselves of "their" services.

    And then when it turns pear shaped, which it does regularly, when they get greedy - we have to bail them out.

    And then the cycle repeats. Ad nauseum.

  • rate this
    +2

    Comment number 49.

    @45 Parallel
    I think Gordon Brown had a major part to play in undermining Lloyds...... exerting pressure(or his renowned 'bully boy' tactics) on the directors at the time.... sorry @44 m, just read your comment in mid flight, totally agree!

  • rate this
    0

    Comment number 48.

    32.
    steve
    26 Minutes ago

    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".
    =
    You don't need to, some do it for themselves.

    Osborne is doing what the Socialists said would never happen - he's getting back the money Brown chucked at the banks.

  • rate this
    +3

    Comment number 47.

    Is it going to be used to bribe the electorate with sweetners after all the bitter pills we've been force fed. Anyone would think there's an election coming soon.

  • rate this
    +11

    Comment number 46.

    The government is already in profit from the £2.5bn Lloyds paid for the asset protection scheme and RBS also paid the same amount...

  • rate this
    +4

    Comment number 45.

    36. DevilsAdvocate
    Bought at £328 now worth £0.77 I think you'll find the only losers were the shareholders. HBOS, Crash, Daniels & Hornby wrecked Lloyds, not the shareholders, but we took the hit.
    __
    That is what shareholders do (or should do). Take the risk, the divis, and then if it happens, the hit.
    I just get a smaller pension, virtually no interest, and eroded savings.
    In it together!

  • rate this
    +10

    Comment number 44.

    #29/33 I agree

    Lloyds was a well run bank who's s/h were thrown to the dogs by Gordon Brown who rushed bosses into buying a busted bank with hidden liabilities. Tax payers were called to provide supporting capital but it has cost Lloyds s/h capital and lost dividend. Without that sacrifice the taxpayer would have been in for a lot more and it should be offered to original holders at a discount.

  • rate this
    +2

    Comment number 43.

    36. DevilsAdvocate
    I feel your pain totally. With capitalism though you have to take the rough with the smooth. I bet you the next time you own bank shares directly you'll make sure the bank is investing and lending to suit your risk profile.
    The people who got away with murder though were the bond holders. They lost nothing.
    And Gordon Brown.

  • rate this
    +3

    Comment number 42.

    22 Eurows
    They should have lost their shares entirely.
    =
    Daniels saved Gordons political skin at a cost of Lloyds.

    increasing again in value and at some stage they will have lost nothing.
    =
    Lloyds at £3.28 per share again - don't make me laugh!

    Meanwhile thousands of people have suffered.
    =
    They are called Shareholders.

    Whose the idiot. Obviously me and not you.
    =
    you said it

  • rate this
    +10

    Comment number 41.

    Yes circa £2bn was paid to the government for the 'implied support' they gave via the Special Liquidity Scheme. Unless the government sells at fire sale prices it will turn an actual profit - even after inflation.

  • rate this
    +19

    Comment number 40.

    Anybody can buy shares in Lloyds, now, at a little over 77p a share. You don't have to wait for the government to sell its shareholding. There is already a market in this stock. Robert always conveniently omits to mention the enormous insurance/indemnity fees the 2 banks (Barclays refused) paid the govt to be rescued. I wish, just once, he'd come clean about this & include them in his reckoning.

  • rate this
    +1

    Comment number 39.

    This is not a political decision. Look at the wider global financial situation,particularly the forthcoming taper, and the effect that will have on interest rates, the Eurozone and the developing economies. With the real possibility of rapidly rising interest rates globally reducing the taxpayer exposure to banks would seem like a sensible move. Shame it's only a small chunk ! Hope it goes well.

  • rate this
    0

    Comment number 38.

    I was a long term LTSB and then Lloyds shareholder, did sell on peaks but bought on dips. Anyway back to the point having been with them 20 years banked some fat dividends which more than covered the initial purchase, I took a good capital gain in 2006 because I was convinced the UK spending party was coming to an end and felt Lloyds were to exposed to the UK economy. It does pay to sell

  • rate this
    -5

    Comment number 37.

    @30
    Taxpayers getting their money back? Er, no. This budget sell-off (loss in real terms) will fill Treasury coffers by small amount. 'Oh! Far too small to give back to taxpayers via a tax cut'.

    Best way to privatise Lloyds w/be to give shs to everyone who fills in tax return. They can then keep or sell. Saves on advisors fees, broker costs, etc., & gives the money back to those who paid it.

  • rate this
    +6

    Comment number 36.

    Duke of Earl

    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.
    =
    Bought at £328 now worth £0.77 I think you'll find the only losers were the shareholders. HBOS, Crash, Daniels & Hornby wrecked Lloyds, not the shareholders, but we took the hit.

  • rate this
    +4

    Comment number 35.

    Yes the article seems to forget that the Government was paid sums of money in terms of fees and I believe P share dividends which were set at a good rate of return. Correct me if I am wrong

 

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