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Osborne says ‘this is not the time’ for Lloyds Bank share sale

Lloyds Bank Black HorseChancellor George Osborne has postponed plans to sell shares in Lloyds Banking Group to the public because of the uncertain economic conditions.

Mr Osborne had intended to launch a £2 billion issue this spring a series of successful placings of Lloyds stock with institutions which has reduced the taxpayers’ stake to about 10%.

A public sale was promised in the Conservatives general election campaign and would have enabled the government to move the bank fully into the private sector.

But today Mr Osborne said the slump in the markets meant this was not the right time to sell.

“We’ll only sell when turbulent markets have calmed down,” he said.

“We’ll build a share owning democracy,” he said on Twitter. “So British people can buy Lloyds shares but we’ll only sell when turbulent markets have calmed down.”

Osborne tweet

Shares in Lloyds, at 63.4p, are well below the 74p price the government paid when bailing out the bank at the height of the financial crisis.

Plans to offer investors a 5% discount on the shares, and a bonus share for every 10 bought, would have left the Treasury even further in the red.

Laith Khalaf, senior analyst at Hargreaves Lansdown said: “This will be a big disappointment for the hundreds of thousands of investors who had queued up for a chunk of Lloyds, but taking a big loss on selling shares when markets are low was always going to be a bridge too far for the chancellor.”

The sale of Lloyds, which includes Bank of Scotland, would have been one of the largest privatisations since the 1980s when BT and British Gas were sold, raising £3.9bn and £5.6bn respectively.

Delaying it will also need to be factored into the public finances and Mr Osborne is likely to update the market in the Budget.

Russ Mould, investment director at AJ Bell, said: “The Chancellor cites market volatility, which has left Lloyds’ share price at 63.7p, well below the Government’s average purchase price of 73.6p.

“Osborne will clearly be looking for a better deal for the Government, to maximise returns as best he can, and he won’t want any issue that was aiming for substantial involvement from private investors to be a flop.  That would damage already fragile sentiment and make it harder for any future privatisations to do well.

“Investors will also note that it is not just Lloyds’ share price that is struggling – all banks are floundering. Bank sector indices in the UK, Europe and USA are all trading at their 12-month lows.”

  • The Financial Conduct Authority has announced an investigation into the behaviour of senior managers at HBOS at the time of the financial crash. HBOS was forced into a hurried merger with Lloyds to save it from collapse.

Two reports were published in November which were critical of the regulator at the time of the crisis for failing to take action.

HBOS trio

One of those reports, by barrister Andrew Green QC, said regulators should consider banning 10 former HBOS executives. The bank was led by Lord Stevenson (chair) and its chief executives were James Crosby and Andy Hornby.

Today the FCA said: “The Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) have decided to start investigations into certain former HBOS senior managers.

“These investigations will determine whether or not any prohibition proceedings should be commenced against them. The FCA and PRA continue to review materials with a view to making further decisions regarding other former HBOS senior managers.”

David Hillman, spokesperson for the Robin Hood Tax campaign, a coalition of 120 UK organisations calling for financial transaction taxes to help tackle poverty and climate change, said: “Finally, at least some bankers may be held to account for their role in the crash, though this a chronic case of too little too late.

“The real injustice is that the financial sector brought our economy to its knees, yet it seems everyone else apart from those involved are suffering the consequences. There’s one giant IOU from banks to society still pending.”

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