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UK taxpayers hold 39% of Lloyds Banking Group, and the phraseology being used on Wednesday evening by the chancellor George ‘not Jeffrey’ Osbourne has led the markets to believe that this arrangement could be brought to a close before the end of the year.
In a sea of red yesterday Lloyds was one of the very few equities that managed to keep its head above the water-line, illustrating how well markets received the news. While it was essential for the government to intervene in 2009 to avoid a run on the Lloyds share price, its presence is now viewed as more of a hindrance. Politics and business do not always make the best of bedfellows, and it is obvious that traders and investors view a Lloyds unencumbered by the government’s direct guidance as a more attractive investment.
In his speech, the chancellor confirmed that a sell-off of the Lloyds position would only be undertaken if it resulted in value for the taxpayer. As the government net break-even level is 61.2p, and as of mid-morning shares are trading above this, that hurdle would seem to have been cleared. Of course, in placing such a large percentage of a company’s shares into the market, it is likely that they will need to be at a discount in order to gain support. With that likely to be the case a little more headroom is required.
One thing that is likely is that untangling itself from Lloyds will be considerably easier for the government than separating from Royal Bank of Scotland will be.