DID LARRY Summers and Vladimir Putin conspire to save the Lloyds reprivatisation? This unlikely pair have blown away the macro clouds that just ten days ago were threatening a delay. With neither Syrian escalation nor market turmoil from a tapering Fed looking so alarming, UKFI has seized the day.
It was only a matter of time. With a share price that has doubled in a year, handily outperforming the FTSE 100, Lloyds was ripe for the picking.
And Osborne can reassure himself that he is getting a good deal for the taxpayer. The current share price means even at a slight discount taxpayers will not lose. We paid 73.6p a share in 2008 and the lowest break-even price used is just 61.2p. They closed last night above 77p.
This also looks like an attractive buy for investors. The price is still far from pre-crisis levels. More important, under the leadership of Antonio Horta-Osorio its increased focus and sale of non-core assets has seen profits leap. The first half of this year saw the group’s profit before tax hit £2.13bn, compared to a £456m loss in the same period of 2012. With the first dividend since 2008 predicted this year, and Horta-Osorio promising up to 70 per cent of profit paid out in dividends by 2015, now looks a good time to buy in.
For the moment, this opportunity is institutional-only. That was always going to be the case, as Osborne laid out in the summer. But he also hinted at a retail offer to follow. With this sale only constituting 15 per cent of the government’s current holdings in the banking behemoth, there’s still plenty for everyone. Regulations keep UKFI from returning to the market within three months, but it may have its eye on a New Year’s present to the nation.
Osborne will also have his eye on the Treasury’s gain. A disposal of six per cent of Lloyds could be £300m more than the entire Royal Mail sale. That’s a reminder of just how much is left to sell. Faster, please.