A visitor leaves a Lloyds Banking Group office building in London. The planned sales would take the government’s stake in Lloyds to about 7%, based on current share prices.
Reuters/London
Britain will raise at least £9bn ($13bn) selling shares in Lloyds Banking Group in the coming year as it looks to recover £66bn of taxpayers’ money spent bailing out banks in the financial crisis.
The government also said it would sell £13bn worth of home loans held by bailed out Northern Rock and Bradford and Bingley.
Britain spent £20.5bn rescuing Lloyds during the crisis of 2007-9, leaving it with a 41% shareholding. Another £45bn was spent bailing out Royal Bank of Scotland.
“Five years ago they (Labour) were bailing out the banks, now we’re selling more bank shares,” Finance Minister George Osborne said in his last budget before a national election in May.
As part of further measures aimed at making banks play their part in Britain’s economic recovery, Osborne said he was increasing the rate of a bank levy to 0.21% of a lender’s assets from 0.16%.
The measure, the eighth increase since the levy was introduced in 2011, will raise an additional 900mn pounds a year.
“The banks got support going into the crisis, now they must support the whole country as we recover from the crisis. I believe they can make a bigger contribution to the repair of our public finances,” he said.
The government has so far raised £8.5bn selling Lloyds shares, cutting its stake to under 23%. It said any further sales will be subject to market conditions and getting value for taxpayers.
Shares in Lloyds are currently trading at 79.15 pence, comfortably above the government’s 73.6 pence buy-in price. The planned sales would take the government’s stake in Lloyds to about 7%, based on current share prices.
Osborne did not say how the latest sales will be structured.
UK Financial Investments (UKFI), which manages the government’s stakes in bailed-out banks, raised £7.4bn through two sales to financial institutions in September 2013 and March 2014. It has adopted a different approach since, appointing investment bank Morgan Stanley to sell shares in the open market through a “pre-arranged trading plan”.
The government said the bank levy increase and stopping banks from deducting Corp tax from loan insurance and other compensation payments would bring in £5.3bn over the next five years.
The bank levy should bring in £3.6bn in 2015/16, up from 2.8bn in 2014/15 and its previous target of £2.9bn a year. The government forecasts the bank levy will stabilise at £3.7bn a year. The tax deduction will cost banks £150mn to £260mn a year, it estimated.
