Daily Management Review

Drop in Share Prices Halts UK Governments Attempt to Privatise Llyods Bank


Drop in Share Prices Halts UK Governments Attempt to Privatise Llyods Bank
The government’s plan to sell off the stocks of Lloyds Banking Group at a profit and return the bank to private hands was halted after the shares of the group dipped below 70p.
With concerns over the state of world economy weighing on investors’ sentiment, there has been a slide in the share prices of all of Britain’s biggest banks in the past month.
However for Lloyds, the exact level of the share price is currently more significant than for its rivals.
The shares at Morgan Stanley have been ordered to be sold off whenever the price is above 73.6p by the Government’s agency UK Financial Investments. 73.6p is the level at which the state bailed out Lloyds in 2008. 
Cutting taxpayers’ stake in Lloyds from more than 24pc a year ago to below 10pc now has been a successful strategy for the British government in reducing its stake in the private banks that it had bailed out during the financial crisis of 2008.
However the sale has been held off for more than a month now as the share price has been below 73.6p.
The last time shares were sold was in October and there has been no new announcement since then. In comparison, stock was being sold every fortnight this summer when the share price was above 80p.
Chancellor George Osborne extended it for another six months to continue the sell-down as and when the price was high enough, even as the scheme had been scheduled to end this month.
Shares at Lloyds have dipped back down below the level at which the government bailed the bank out even though the banking group has been cleaned up since the financial crisis.
There was hope within the UKFI that the remainder of the shares, after having sold of the government shares in the bank to a substantially low level, could be sold off in a retail sale shortly after the bank’s full-year results in February.
There are plans to offer a 5pc discount on the trading price of the stock as the government hopes that it would entice small investors.
However if the share price remains where it is now, the sale will have to wait as the government also wants to make a profit. In case the prices of shares do not rise in the near future there are possibilities that the institutional investors will be invited to take part in the sale of shares as the government stake may be too big for a retail-only offer to small shareholders.
Previous sales have indicated that the market is able to cope with a stake of 8pc or more of the bank going on sale at one time as it has been seen that institutions did buy as much as £4bn of stock at a time.
  “The performance of bank stocks in the UK and Europe has been under pressure over concerns on where earnings upgrades will come from, the falling commodities markets, and some investors are asking about the EU referendum ad Brexit risk. All of these have weighed on the sector,” said analyst Joseph Dickerson.