Taxpayers’ stake in Lloyds cut by another £500m

THE Government has sold another £500m-worth of shares in Lloyds Banking Group, amounting to a 1pc stake in the bank.

As a result, the Treasury’s stake in Lloyds stands at just below 12pc, worth £6.3bn at current market prices.

It comes a month after taxpayers’ interest in the bank was cut to below 13pc.

Investment bankers at Morgan Stanley sell the shares on behalf of UK Financial Investments, the state agency responsible for managing shareholdings in bailed-out banks for the Treasury.

They trickle the stock onto the market when the shares can be sold above the break-even price of 73.6p.

Earlier in the year the stock was trading as high as 89p per share, prompting Morgan Stanley to sell a 1pc stake roughly every 10 days, netting a tidy profit for taxpayers, who bailed out Lloyds during the financial crisis.

The Government’s shareholding in Lloyds has fallen from 25pc in late 2014. At its peak, taxpayers owned more than 40pc of the bank.

The pace of the sell-off slowed in August, partly because trading volumes in the market are lower and the investment bankers have been told not to swamp the market with stock, but also because the share price has fallen.

In late August, the price dropped briefly below 73.6p, meaning the Treasury would not sell the stock. The shares are trading at 73.8p, barely above the break-even price.

Analyst James Chappell, at Berenberg Bank, fears even this price is unsustainably high.

He said that the shares could fall to just 55p, arguing that investors’ expectations of 3pc revenue growth in each of the coming three years is unlikely to be achieved, and that PPI compensation costs wre unlikely to come to an end any time soon.