Thu, May 18, 2017 - Page 10 News List

Lloyds bailout nets UK government US$1.2 billion

Bloomberg

The UK government sold its last remaining shares in Lloyds Banking Group PLC, bringing Britain’s biggest mortgage lender back into full private ownership almost a decade after it was bailed out in the depths of the financial crisis.

The British Treasury made a profit of £894 million (US$1.2 billion) on its original £20.3 billion investment after disposing of its final 0.25 percent in the bank over recent days, Lloyds said in a statement yesterday.

The London-based lender said the sale marked the final step in its turnaround, although more work is required.

The bank’s return to full state independence follows efforts by chief executive officer Antonio Horta-Osorio to restore the lender’s profitability and financial strength and is a symbolic moment for British Prime Minister Theresa May as she pushes to win a bigger mandate from British voters next month.

Still, the UK still owns more than 70 percent of Royal Bank of Scotland Group PLC and will probably make a loss on its stake on that lender when it is divested.

“Today marks the final step in the rescue and rejuvenation of Lloyds,” chairman Norman Blackwell said in the statement. “However, we are not complacent. While we are proud of the progress we have made over the last few years, we recognize there is still a lot to do to transform Lloyds.”

The government, which at one point owned 43 percent of the bank, has gradually sold shares to investors through a trading program run by Morgan Stanley announced in December 2014.

BlackRock Inc, the world’s largest asset manager, replaced the government as Lloyds’s biggest investor in January.

“It has been a long road since the government made its £20.3 billion ‘investment,”’ Ian Gordon, an analyst at Investec Bank PLC, said in a note to investors this week.

“The removal of a technical drag from the sale of up to 15 percent of the average daily volume is positive,” Gordon said, referring to shares that had been sold under the trading plan.

Although the government ultimately made a profit, including £400 million from dividend payments, the funds used for the capital injection in 2009 could have been deployed elsewhere.

The UK had little option but to rescue the lender, which needed most of the bailout because of its government-assisted takeover of HBOS PLC.

Attention at Lloyds will now to turn to succession planning for the eventual departure of Horta-Osorio, one of the longest-serving bank CEOs in Europe.

Although he told reporters last month he was happy at the bank, there is speculation over his future as Lloyds prepares a three-year strategy to be unveiled at the end of the year.

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