Updated, 3:43 a.m. | The British government raised £3.2 billion, or $5.1 billion, on Tuesday after it sold part of its stake in the Lloyds Banking Group.
The decision to sell 6 percent of the bank’s shares comes five years after Lloyds received a multibillion-pound bailout from taxpayers and is an effort to take advantage of the firm’s improving fortunes since the financial crisis.
The share sale, which was priced at 75 pence, or a 3.1 percent discount on the firm’s closing price on Monday, reduces the British government’s holding in the bank to 33 percent from about 39 percent.
The offering generated around a $96 million profit for local taxpayers, based on the original price that the British government paid for its stake in Lloyds.
Analysts expect United Kingdom Financial Investments, the British agency in charge of managing the holdings in the country’s bailed-out banks, to progressively sell down its stakes in both Lloyds and the Royal Bank of Scotland over the coming years.
George Osborne, the chancellor of the Exchequer, said earlier this year that the government was considering reducing its stake in Lloyds, which has benefited from Britain’s improving economy.
The share sale represents a victory for the current British government and will allow local taxpayers to profit from Lloyds’s return to profitability. The proceeds mirror similar returns the United States government made after bailing out some of its largest financial institutions during the crisis.
Lloyds, whose share price has risen 93 percent over the last 12 months, has shed many of its so-called noncore assets and has refocused on lending to British customers. The bank’s second-quarter profit more than doubled, to $2.1 billion, and its current share price is above the break-even price of 74 pence a share that the British government paid for its original holding. Lloyds’ shares fell 1.9 percent, to 75.9 pence, in early trading in London on Tuesday.
Many analysts have set a 100 pence target price for Lloyds, whose fortunes contrast with those of the Royal Bank of Scotland, which continues to suffer from a bloated balance sheet and several changes to its senior management. British taxpayers own an 81 percent stake in the bank.
“I am pleased that the government has been able to begin the process of selling its stake and give taxpayers the opportunity to get their money back,” the chief executive of Lloyds, Antonio Horta-Osorio, said in a statement.
United Kingdom Financial Investments said it would not sell shares in Lloyds again for at least 90 days after the sale was completed.
“Another placing in early 2014 to institutional investors appears likely,” Citigroup analysts said in a research note to investors on Tuesday. “Any offer to retail individuals is more likely to come at a later date.”
Earlier on Monday, the British government agency announced that James Leigh-Pemberton, the chief executive of Credit Suisse’s British business, would take charge of the agency next month.
He will succeed Jim O’Neil, formerly of Bank of America Merrill Lynch, who announced in April that he was stepping down from the role to return to the American bank.
Bank of America Merrill Lynch, J. P.Morgan Cazenove and UBS will manage the share sale, while Lazard and the law firm Slaughter and May are advising United Kingdom Financial Investments on the deal.