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Government cuts stake in Lloyds below 3%

The Treasury announced this morning it has cut its stake in Lloyds bank to below 3%.

  • Taxpayer has now recovered £19.5 billion of £20.3 billion bailout
  • The Treasury stands to make an estimated £1.5 billion from selling its remaining stake
  • Lloyds share price is almost back to pre-Brexit levels
  • RBS still a long way behind

Laith Khalaf, Senior Analyst, Hargreaves Lansdown:

"The finish line is now within sight for the UK taxpayer, who can look forward to recovering all the money pumped into Lloyds during the financial crisis. Meanwhile Lloyds continues to make ground in its quest to become a normal, fully privatized bank.

Lloyds’ share price was badly hit by Brexit; it plummeted by more than a third in the fortnight following the referendum result. Since then Lloyds has recovered much of its poise, thanks to some decent numbers from the bank itself and from the wider economy, and the shares now trade close to where they stood before the Brexit vote. The current share price is 68p, while on 23rd June 2016 the stock changed hands for 72p when the closing bell rang for the last time before the referendum result was announced.

Based on the current Lloyds share price, selling its remaining stake in the bank would net the Exchequer somewhere in the region of £1.5 billion, comfortably taking it over the threshold needed to break even on the bailout.

There’s also a tasty dividend coming in May, which could see the taxpayer pick up a further £47 million in cash, though that will depend on how much further the Treasury cuts its stake between now and 6th April, which is the qualifying date for the payment.

For the Treasury, the elephant in the room is of course RBS, which soaked up £45.5 billion of taxpayer funding during the financial crisis, more than twice the sum needed to prop Lloyds up. Progress has been slow at RBS, and the cost of US litigation still looms large in its immediate future.

The RBS share price needs to double from its current level before the taxpayer breaks even on the bailout, and that isn’t happening anytime soon."