Treasury To Sell 7.5% Stake In Lloyds Banking Group PLC

The share price of Lloyds (LSE: LLOY) (NYSE: LYG.US) fell by 4% to 76p during early trade this morning, after the government announced its intention to sell a further 7.5% to the private sector.

LLOYThis would reduce the government’s stake in the bank to around 25%. The shares will be offered to institutional investors, but a retail sale may be forthcoming later in the year.

The stake will comprise of 5.35bn shares, which at the current share price would be worth £4.1bn.

Last month Lloyds announced it had double its underlying profit to £6.2bn, and the 7.5% sell-off indicates the treasury’s growing confidence in the lender.

Lloyds chief executive, Antonio Horta-Osório, commented:

“I am pleased that the government intends to sell a further stake in Lloyds Banking Group and allow taxpayers to get more of their money back. I believe this reflects the hard work undertaken over the last three years to make Lloyds a safe and profitable bank that is focused on helping Britain prosper.”

After this morning’s price movement, shares in Lloyds may trade on a price/earnings ratio of 11. At present there is no dividend, and while Mr Horta-Osório claims Lloyds is now “a normal bank”, the resumption of dividend payments is the final hurdle.

Potentially this could happen in the second half of the year, after the bank announced it expects to apply to the regulator to restart payouts at a “modest level”.

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Mark does not own shares in Lloyds.