The history of the government’s stake in Lloyds started in 2008, following its acquisition of HBOS and a subsequent taxpayer bailout that brought it back from the brink at the height of the financial crisis. Specifically, the then Labour government acquired a 43.4% stake in the bank at an average price of 73.6p per share. The shares had traded below this level until May 2013, at which time the Chancellor George Osborne signalled a plan to start selling the taxpayer’s stake. The first tranche was sold in September 2013 at a £60m profit; and since December 2014 further shares have been drip fed into the market such that today the public stake is approximately 9%.
This time around, Mr Osborne is planning to sell the final £2bn worth of shares, with several incentives to attract interest from retail investors. However, year to date Lloyds has been trading below the breakeven price and is close to a three-year low of 64p at the time of writing (i.e. a 13% loss). Mr Osborne has therefore announced the sale will be postponed – blaming market volatility – until “turbulent markets have calmed down”.
It could be several months before this volatility dissipates, and therefore some time before the public stake in Lloyds is exited in its entirety. However, it is reassuring to note that the government is monitoring the situation closely; and the 30 June deadline – which has already been extended by six months – is not set in stone, providing flexibility with regard to timings and thus reducing the risk of loss for UK taxpayers.
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