Members of the public may be able to snap up shares in state-backed Lloyds Banking Group as soon as April after it was announced yesterday that preparatory work for a possible flotation had begun.
The multi-billion pound offering is likely to exceed the size of the stake available to retail investors who took part in the Royal Mail privatisation last autumn.
The Treasury still owns a 33% chunk of Lloyds following its rescue during the financial crisis, after it swallowed up troubled Halifax Bank of Scotland. A 6% stake has already been sold off to institutional investors - raising £3.2bn in September.
Now, Lloyds has confirmed that preparatory work “including the preparation of certain documents required for a possible future sale of shares in Lloyds Banking Group to the public” has begun.
Such a sale cannot take place until after the group’s annual report and accounts are published in March, prompting speculation that the public offering will take place in April.
It is also believed that not all of the Government’s stake will be sold to members of the public at that stage and that the remainder will be disposed of separately at some point before the general election in 2015.
Still, a comparison with the Royal Mail flotation in October suggests the Lloyds public offering will easily be bigger. Royal Mail was initially valued at £3.3bn when privatised, though out of the stake of just over half that was at first made available, only aw third was set aside for retail investors. The current market value of Lloyds, at more than £57 billion, means that were a 10% chunk to be sold to the public, it would be worth nearly £6 billion.
Any sell-off will be closely scrutinised over whether it provides value for money for the taxpayer’s £20bn bail-out. A National Audit Office report in December found that last autumn’s institutional sell-off resulted in a loss of at least £230 million, once the cost of borrowing money to fund the bail-out was taken into account.
The sale did, however, make a cash profit of £61 million on the face value for which the shares were bought - and because of the way national accounts are compiled, wiped more than half a billion pounds off the national debt. The NAO concluded that the process was “managed effectively and provided value for money”.
It offered a 3% discount on the share price, which was just above 77p at the time of the close just before it took place. The stock has since risen and now trades at more than 80p.