The UK government, and therefore the taxpayer, could make a handsome profit if it sold its remaining shares in Lloyds plc (LON:LLOY) to retail investors today, a City broker said, as rumours swirled that Whitehall was considering ditching the sale.
The government still has a 9% stake in the banking titan after it stepped in to bail it out during the financial crisis eight years ago. It has gradually been reducing its holding through a series of sales in recent years.
Laith Khalaf at Hargreaves Lansdown said the Treasury could sell the 9% at a profit of £2.7 billion, thanks to dividends, fees, and deals struck last year at relatively high prices, and could still meet its promise to retail shareholders of offering them a 5% discount, and one-for-ten bonus shares.
"To just break even on the Lloyds bailout, the government only needs to sell the shares for 7.5p each," he noted. To put that into context, Lloyds shares are today at 54.15p - up 1.88%.
In 2009, the government paid out a whopping £20.3bn across three tranches but has subsequently sold off about three quarters of its stake between 2013 and 2016, netting around £16.5bn.
Lucrative sales
Between December 2014 and March 2016, the government sold around 40% of its stake at an average price of 81.4p, in a series of particularly lucrative deals.
So totting it all up, says Hargreaves, the gov't is £488 million away from breaking even on the bailout.
If the government sold the shares at today’s price of 54p it would net a further £3.2bn and taking off the £488mln, leaves a profit of £2,711 million.
Reports at the weekend suggested worries over Brexit has prompted new chancellor Phillip Hammond to consider abandoning the offer.
Earlier this year, former No 11 resident George Osborne delayed the planned sell-off due to market volatility having said he wanted to sell the shares within 12 months following last May's general election.
Breach of trust?
Khalaf said: "City institutions are no doubt licking their lips at the prospect the new Chancellor might cut private investors out the Lloyds share sale.
"But this would be taken as a breach of trust by hundreds of thousands of retail investors, who have been repeatedly told by the government that a share offer is coming.
"Clearly the Chancellor has a lot on his plate right now, but investors would welcome some certainty over the share sale, so they can plan their financial affairs accordingly."
More than 350,000 private shareholders have registered an interest in the Lloyds share sale through Hargreaves Lansdown.