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Britain pockets £3.2 bn from part sale of Lloyds bank

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(Globalpost/GlobalPost)

The British government earned £3.2 billion from selling six percent of Lloyds Banking Group, it announced Tuesday, placing the part-nationalised lender on course for a full return to the private sector.

The coalition government had on Monday launched plans to sell part of its stake in bailed-out LBG after a recent upturn in the bank's fortunes following its rescue at the height of the global financial crisis in 2008.

UK Financial Investments (UKFI), which manages the government's stake, said about £3.211 billion ($5.12 billion, 3.83 billion euros) was earned from the sale of LBG shares priced at 75 pence each to institutional investors.

LBG shares were down 2.28 percent at 75.6 pence in early trading Tuesday on London's benchmark FTSE 100 index, which was down 0.28 percent overall to 6,604.14 points.

The government had said it needed 63.1 pence a share to break even following the bank's hefty bailout.

"Further to its announcement on 16 September 2013, UKFI announces the successful completion of the disposal of part of HM Treasury's shareholding in Lloyds Banking Group," a statement said.

The Conservative-Liberal Democrat coalition government's stake in LBG has in turn dropped to about 32.7 percent from 38.7 percent.

The government is hoping to eventually recoup £20 billion of taxpayers' cash ploughed into the group created by a merger of Lloyds TSB and rival British lender HBOS amid the crisis.

With HBOS at the time saddled with high-risk property investments, LBG subsequently received a vast state bailout under the then-Labour administration.

British finance minister George Osborne, a member of Prime Minister David Cameron's Conservative party, authorised Monday's part sale.

It comes after LBG, whose chief executive is Portuguese national Antonio Horta-Osorio, revealed in August that it had bounced into profit and was looking to resume shareholder dividend payments.

Horta-Osorio on Monday said he was "pleased" the government had begun the process of selling its stake.

"I believe this reflects the hard work undertaken over the last two years to make Lloyds a safe and profitable bank that is focused on supporting the UK economy," he added.

Analysts said the partial sale provided a boost to Britain's strained banking sector, symbolised to a large extent by Royal Bank of Scotland's (RBS) struggle to follow in the footsteps of LBG and be released from the government's grip.

The sector has also been hit by the Libor interest rate-rigging scandal and mis-selling of insurance products.

"With the UK (general) elections in 2015, the coalition government appear to be playing the re-privatisation of Lloyds strategically by gradually selling ahead of the elections -- the government has said the next stake sale will not be for another 90 days," said Joe Rundle, head of trading at ETX Capital.

"Putting the politics aside, the move to offload the six-percent stake is very welcome, particularly for the UK banking sector which continues to suffer from a mixture of scandals, litigation and poor reputation amongst the UK public.

"Lloyds has turned out to be a model student versus RBS which has been unable to repair its finances as quickly and as efficiently as Lloyds," Rundle added.

As part of its turnaround and to meet European Union competition criteria, Lloyds last week relaunched TSB as a standalone lender.

LBG rebranded 631 of its British branches, calling them TSB, ahead of their stock market flotation planned for next year. TSB was a familiar part of Britain's banking landscape until Lloyds snapped it up 18 years ago and folded it into its name.

The government meanwhile holds 81 percent of Edinburgh-based RBS.

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http://www.globalpost.com/dispatch/news/afp/130917/britain-pockets-32-bn-part-sale-lloyds-bank