Government lowers Lloyds stake below 20% with £500m share sale

UK Financial Investments, the holding company which controls the government's stakes in bailed-out lenders Lloyds and RBS, has taken its stake in Lloyds to below 20%.

The investment vehicle set up by HM Treasury sold £500m-worth of shares in the bank and now holds 14,223,560,740, equal to a 19.93% holding.

The shares were sold at a price of 73.6p each, compared with Monday's closing price of 86.6p.

The government has now raised £10bn from share sales since its originally purchase of a 43% stake in Lloyds' £20bn rescue in 2008-09.

Chancellor George Osborne has said that the government plans to sell £9bn of Lloyds shares this year.

Westminster gets timing bang-on

A Lloyds spokesperson said: “Today’s announcement shows the further progress made in returning Lloyds Banking Group to full private ownership and enabling the taxpayer to get their money back."

I expect further [share price] progress to be much more muted over the next twelve months

Analyst Michael Hewson from CMC Markets pointed out that the share sale reduces the government's influence on how the bank manages its day-to-day operations.

"That has to be a good thing given it also gives the bank more control of when to increase its dividend. With the share price well above 80p the likelihood is that the chancellor will continue to pare down the government’s stake at a much faster rate," Hewson said.

Investec's Ian Gordon was largely in agreement, calling the sale "well-timed" and highlighting how the shares were at 6.5-year highs.

However, Gordon added: "with Government plans to dispose of a further £9bn of Lloyds shares over the next 12-months, (including a proposed £4bn retail offer), coupled with the fact that the shares now appear “up with events” I expect further progress to be much more muted over the next twelve months. That said, I still believe it is credible to expect the Government to sell-down its residual holding in full by around the end of 2016”.

The stock was up 0.6% at 87.09p by 16:11 on Tuesday.