The government’s stake in Lloyds has fallen below three per cent, the bank announced this morning in a regulatory filing.
The new sell-off marks the next stage in the government’s efforts to re-privatise the bank, which was bailed out in the global financial crisis.
The Treasury said the sale means the government has recovered £19.5bn of the original £20.3bn bailout funds.
The government will continue to unwind the stake in an "orderly and measured way", the Treasury said. In the Budget last week the government said it was "on track to recover all of the £20.3bn injected into the bank".
Simon Kirby, economic secretary to the Treasury, said: "Lloyds' recent annual results show that we are in a good position to reduce our shareholding further and expect to recover all of the money taxpayers injected into the bank during the financial crisis."
In January the government announced it was no longer the bank’s largest shareholder, with US investment giant Blackrock taking over the reins. It owns a stake in the bank bigger than five per cent, according to an earlier regulatory filing.
At its peak the government owned 43 per cent of the bank. It stepped in during the financial crisis to bail out the lender in October 2008 as the government pumped money into the British banking sector to avoid its collapse.
Chancellor Philip Hammond is reportedly one of the driving forces behind efforts to return the bank's shares to private hands, even at a reduced value. However, the government has previously said the sales would not realise a loss owing to fees and dividends.