Taxpayers have made a near-£900m profit on the sale of their stake in Lloyds Banking Group, the lender claimed, as the government offloaded its final stake in the bank and closed a chapter of the 2008 financial crisis.
Almost nine years ago, the government pumped £20.3bn into Lloyds, buying up a stake that eventually mounted to 43%. The bank said proceeds of the share sales and dividends received meant taxpayers had received nearly £900m more than the government pumped in.
António Horta-Osório, the bank’s chief executive, said: “Today the government has sold its last shares in Lloyds Banking Group, receiving more money than was originally invested.”
However, there are a number of ways of calculating the cost of the bailout. The calculations by Lloyds do not include the £3.6bn cost of borrowing funds in the depths of the 2008 crisis, while the Office for Budget Responsibility has used other methodology to show the government will ultimately break even.
The bank was born out of the financial crisis when Lloyds TSB rescued HBOS from the brink of collapse and has since undergone an overhaul that has led to 57,000 job cuts and a dramatic scaling-back of its lending activities.
The fall in the taxpayer stake to zero was confirmed on Wednesday, in the midst of the general election campaign, after a four-year process of reducing the stake.
Philip Hammond, the Chancellor, said the return to the private sector was a “major achievement”.
“The bailout has now been fully repaid and all taxpayers’ money returned,” Hammond said.
Horta-Osório, who joined the bank in 2011 and has received almost £40m in cash and bonuses since then, said “Six years ago we inherited a business that was in a very fragile financial condition. Thanks to the hard work of everyone at Lloyds, we’ve turned the group around”.
“But the job is not done,” he said, amid speculation that he will now leave because the government stake has been sold. Horta-Osório has been linked with roles at rival banks and politics in his native Portugal.
The bank’s chairman, Lord Blackwell, also insisted there was more work to do. “We are not complacent,” he said. “While we are proud of the progress we have made over the last few years, we recognise there is still a lot to do.
“Today marks the final step in the rescue and rejuvenation of Lloyds Banking Group. The combination of our strong financial performance and the progress we have made towards our strategic priorities has enabled over £21.2bn to be returned to the government, more than repaying the amount that taxpayers invested.”
The removal of the taxpayer stake means that Horta-Osório will have met the conditions attached to some of the bonuses he has has received in shares and they will be released next year.
Taxpayers bought the shares during three stages of the financial crisis at an average price of 73.6p a share. Four years ago the shares were sold at prices above this breakeven level, but the more recent sales took place below this price.
The shares were trading at 70p on Wednesday after the announcement was made that the government had offloaded its stake.
The sell-off has not taken place as envisaged by George Osborne when he was chancellor as had aimed to hold a discounted share sale to the public – which had to be abandoned when Lloyds shares slumped.
Re-disseminated by The Asian Banker from The Guardian