Government to sell £2bn Lloyds stake to public at a discount

The Treasury said that the government would sell the 12 per cent stake that remains of the 43 per cent of the bank that it took on at the height of the financial crisis in 2008 at a cost of £20.5bn to the UK taxpayer.

As part of the sell-off, a sale aimed at private investors will be launched next spring, the statement said.

Members of the public will be offered a 5 per cent discount to Lloyds’ market price and small investors seeking shares worth less than £1,000 will get priority.

Those who keep their shares for at least 12 months will get one bonus share for every 10 they own.

The value of the bonus share incentive will be capped at £200 per investor.

The share sale will be launched in spring next year, with applications available online and by post.

The move echoes government privatisations in the 1980s, when the Conservative government sold shares worth £3.9 billion in British Telecom and a £5.6 billion stake in British Gas.

The Treasury has recouped almost three-quarters of public funds used to rescue the bank by selling shares to institutional investors.

Proceeds from selling the shares will be used to reduce government debt.

Shares in Lloyds Banking Group rose 1.6 per cent to 77.8p in early trading in London on Monday, valuing it at £54.6 billion.

Laith Khalaf, Senior Analyst, Hargreaves Lansdowns, enthusiastically endorsed the sale from an investor’s point of view.

He said: “Wild horses couldn’t drag investors away from this share sale, especially given the discounted price and the dividend stream Lloyds is expected to start churning out. Pensioners in particular are likely to respond to a trusted high street brand with a decent yield when interest rates are so low.

“Lloyds is already the most popular share held by our clients who have taken advantage of the new pension freedoms to invest rather than buy an annuity. Next year’s share sale is likely to attract even more silver savers to the bank’s cause.

“High profile public offerings like this one are also an effective way to get first-time investors to save for their future. When Royal Mail floated in 2013, more than a quarter of those who applied for shares said it was their first stock market investment.”