Financial News

  • 21 January 2014, 14:43

UKFI Seeks Cut-Price Deal On New Lloyds Sale

The agency which manages taxpayers' stake in Lloyds Banking Group is attempting to secure a knockdown price from City bankers vying to work on a share sale that will return it fully to the private sector.

Sky News understands that UK Financial Investments (UKFI) has asked investment banks in recent days to present fee proposals for executing a sale of part or all of the Government's remaining 20bn stake in Lloyds.

Insiders said the Treasury was seeking a deal under which UKFI would pay no fees on the portion of the transaction which involves selling Lloyds shares to institutional investors.

A previous sale in September saw the Government offload a 6% stake in the bank, a deal which the National Audit Office (NAO) concluded had resulted in loss to the taxpayer of more than 200m but which nevertheless represented good value.

That transaction, which yielded 3.2bn for the Government, saw the taxpayer's stake in Lloyds reduced from 39% to 33%.

The NAO revealed that while institutions paid 4.7m in selling commission to the bookrunners, UKFI negotiated to receive a payment of 25% of the commissions charged to investors.

A source suggested that UKFI would seek a similar structure from the next sale, although it was likely to have to pay substantial fees to brokers involved in organising a large-scale retail share offering.

Sky News revealed earlier this month that UKFI wrote to the Lloyds board during the Christmas break to ask it to write a prospectus that would accompany a major retail sale.

The latest developments underlines the Treasury's intention to sell a large chunk of its remaining 33% shareholding in Lloyds this year.

A formal announcement from the Treasury about a new share sale cannot take place until after Lloyds' full-year results at the end of next month.

Insiders pointed out that the bank would be required to wait until its full-year results had been audited several weeks later before a prospectus could be completed.

Antonio Horta-Osorio, its chief executive, hopes to signal at Lloyds' results that the bank has been given regulatory approval to resume dividend payments to ordinary shareholders for the first time since 2008.

George Osborne, the Chancellor, believes that a sale in which the public can participate could be politically useful as well as delivering a financial boost to the Treasury.

Shares in Lloyds closed on Monday at 83.18p, just 4% below its 12-month high.

The bank now has a market value of almost 60bn, having risen by more than 63% during the last year and meaning that the Government's remaining 33% stake is worth nearly 20bn.

Lloyds and UKFI declined to comment.