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Lloyds slides as government sells

Lloyds Banking Group is down 2% following the government's decision to sell a 6% stake in the semi-privatised lender.

All trading involves risk. Losses can exceed deposits.

The government has reduced its stake in Lloyds from 38.7% to 32.7%. The sale raised £3.2 billion, making £60 million profit for the government. The Liberal-Conservative coalition was formed in May 2010 so it has time to unwind its position in the financial institution before the next general election, as it tries to strike a balance between providing stability to the bank while not becoming a speculator itself.

The share price is currently trading lower as traders believe the government may sell off similar-sized tranches in the future. However, some believe that the government’s assistance to Lloyds during the credit crisis restricted its share price growth; the market should bear in mind that they will now have increasingly less influence over the organisation. Barclays, which did not require Westminster funding, has seen its share price outperform Lloyds.

After the dust settles on today’s government disposal, we may see some buyers of Lloyds.

Lloyds Banking Group chart

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