Government claims Lloyds sale delivers £900m profit

Lloyds

The Government has sold its final stake in Lloyds Banking Group, returning the firm to full private ownership after its £20.3bn 2008 bailout.

Lloyds says the sale returned £21.2bn to the taxpayer, £894m more than the initial investment.

But Laith Khalaf, senior analyst at Hargreaves Lansdown, says even though Treasury appears to have recouped the initial sum, the profit does not include the cost of borrowing the money to fund the bailout.

“Indeed the champagne corks should probably be kept on ice seeing as the taxpayer has only broken even on the face value of the Lloyds bailout, and is still nursing a loss if you factor in the borrowing costs associated with stumping up the money back in 2009.”

When the bank was bailed out after the financial crash the Treasury owned 43 per cent of the institution.

Now UK Financial Investments, which manages the Government’s banking stakes, has sold its remaining 0.89 per cent share in the bank.

Lloyds Banking Group chief executive António Horta-Osório says: “Six years ago we inherited a business that was in a very fragile financial condition. Thanks to the hard work of everyone at Lloyds, we’ve turned the group around.”

Lloyds Banking Group chairman Norman Blackwell hailed the re-privatisation of the group, but added: “However, we are not complacent.

“While we are proud of the progress we have made over the last few years, we recognise there is still a lot to do to transform Lloyds into the best bank for customers and play our full role in helping Britain prosper.”

Woodford’s stake

Khalaf says it is an “interesting coincidence” that the Government is stepping out just as Neil Woodford announces his return to banks through a stake in Lloyds.

The outlook for the bank looks more promising than RBS, which was also bailed out during the crisis, Khalaf says, with PPI compensation “disappearing in the rear-view mirror” and the bank paying a healthy dividend to shareholders.

“Unlike the FTSE 100 as a whole, Lloyds is very much a bellwether of the UK economy because of all the loans it makes to businesses and consumers in this country, so its fortunes are very much shackled to domestic conditions.”

RBS still “casts a long shadow” because its bailout package is twice as big, Khalaf says.

“Progress has been slower at RBS because it had more problems to start with, and it’s difficult to see how the government can realistically sell off its 72 per cent stake in the bank without taking a financial hit.”