Government reopens Lloyds shares to institutions but not individuals

Chancellor Philip Hammond has announced that the government is resuming the sale of its stake in Lloyds but is only making them available to institutions rather than retail investors, contrary to previous plans.

Chancellor of Exchequer Philip Hammond said the time wasn’t right for a retail offer, previously favored by predecessor George Osborne, due to heightened market volatility.

"I have listened to the experts. Ongoing market volatility means it is not the right time for a retail offer," said Hammond.

Instead, the shares will be sold through a “trading plan” which gives institutional experienced investors the chance to buy a stake in Lloyds directly from the government.

"Returning Lloyds to the private sector is in the interests of the bank, taxpayers and the country as a whole. That is why exiting our stake in Lloyds in an orderly way and at the best possible price is one of my top priorities," said Hammond.

The sales were put on pause in the lead up to the Brexit vote. The stock has dropped 27% this year as uncertainty from Brexit and lower interest rates have weighed on the outlook for its earnings.

The treasury has instructed Morgan Stanley to sell down its 9.1% stake in Lloyds, which is equivalent to £3.6bn, over the next 12 months according to UK Financial Investments (UKFI), that manages the government’s stake.

Morgan Stanley can offload as much as 15% of the share trading volume but can’t sell below a “fair value” price that UKFI did not disclose.

Hammond announced the plans during a trip to Washington this morning as part of his bid to reassure American financial companies that the UK is still open for business.

The partly nationalized bank was bailed out by the government for £29bn at the height of the financial crisis and its shares were trading comfortably below the average bailout price of 73.6p .

“Our plan will get back all the cash taxpayers invested in Lloyds during the financial crisis and leave the bank in a better place to continue the crucial role it plays,” said Hammond.

The plan was put into action today, and the Treasury confirmed "sales may commence in the coming days."

Investment Research Analyst at The Share Centre, Graham Spooner says the move “could act as a further drag on the share price in a sector that is already under pressure.”

Regardless of this, Spooner continues to recommend Lloyds stock as a “hold” for medium-risk investors seeking growth.

Tom McPhail from Hargreaves Lansdown said retail investors would be “disappointed” by having the opportunity to buy the shares at a discount from the government stripped away from them.

“Share offers of this nature are an excellent mechanism for developing consumer interest in long term investments, so this decision to place shares via an institution hardly seems in keeping with the new government’s mantra of standing up for ordinary people.”

Lloyds share price fell 5.42% to 52p at 1511 BST on Friday.