On Sep 17, the UK government announced the sale of a 6% stake
Lloyds Banking Group plc
) - UK's biggest retail bank. Of the total holdings of 27.6
billion shares, 4.3 billion shares will be shed at a price of 75
pence per share, resulting in total proceeds of £3.21 billion
($5.1 billion) for the UK Treasury. Following this announcement,
the bank's share price declined more than 2% on the London Stock
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The selling price represents a 3% discount to Monday's closing
price of 77.36 pence but exceeds the price of 73.6 pence per
share paid by the government while buying the stake. Therefore,
the transaction is expected to result in a profit of £60 million
($96 million) for the taxpayers.
The reprivatisation of Lloyds by the government is symbolic of
the banks coming back to profitability and the improving economic
conditions in UK post the recent financial crisis.
The share price of Lloyds has increased 93% over the last 12
months riding on optimism over its restructuring efforts
including the shedding of non-core assets and focus on lending to
British customers. Moreover, the bank reported in August that it
had returned to profit. Lloyds posted £2.1 billion ($3.2 billion)
profit for the six months Jun 30, 2013, compared with a loss of
£456 million in the prior-year period.
When the banks tumbled during the crisis, the UK government
bailed out financial institutions with more than £100 billion.
Notably, £20.5 billion was paid as bailout money to Lloyds and
around £45.5 billion to
Royal Bank of Scotland Group PLC
). Currently, the taxpayers still hold 81% stake in RBS.
UK Financial Investments Ltd - the British agency that
administers the government's stake in the banks it helped bail
out, will place the shares for sale on Sep 20. After the
completion of the transaction, the UK Treasury would be left with
32.7% stake in Lloyds. Most of the shares were vended to the UK
and U.S. funds along with some sovereign-wealth funds.
Notably, the Treasury aims not to sell any more shares for the
upcoming 90 days. Moreover, the second sale, which is expected in
the first half of 2014, might involve retail investors.
BofA Merrill Lynch, a unit of
Bank of America Corp.
), J.P. Morgan Cazenove, part of
JPMorgan Chase & Co.
) and UBS Investment Bank, a unit of
) acted as the joint bookrunners for the Placing.
The UK Treasury conducted the sale process to return taxpayers'
money, maximize support for the economy and reinstate the banks
to private ownership. The reduction of the Treasury's stake in
Lloyds proves that the bank has come a long way since 2008, when
it had to opt for a bailout to survive the economic downturn.
Over the past few years, the company has been restructuring its
business to make it profitable.
We believe that with the exit of the Treasury's stake, Lloyds
will be able to concentrate more on developing its core
operations and boosting revenues in the upcoming quarters.
Investors can consider Lloyds to be a sound investment option,
given its attractive core business.