The sale of the government's 39 per cent stake in Lloyds may be delayed by Syrian turmoil and potential tapering by the US Federal Reserve, as the reprivatisation remains conditional on market performance.
Any intervention in Syria is likely to act as a shock to aggregate supply, with consequences for oil prices, and foreign policy may draw government and media attention from a successful reprivatisation effort.
Tapering in the US - a reduction in the rate of expansion of the monetary base - is expected to dampen aggregate demand not just in the US, but abroad too.
Either of these might see a reduction in appetite for Lloyds stock, and UKFI might wish to ride out these effects in order to achieve a larger return for the bank before recommending a sale.
The U.K. Treasury, which had been preparing to sell as much as 5 billion pounds ($7.8 billion) of shares in the bailed-out lender as soon as this month, is reluctant to go ahead as tensions in the Middle East threaten to destabilize markets, said two of the people, who asked not to be identified because the talks are private. No final decision on the timing of the sale has been made, the people said.
Whether the price will move higher is far from certain. James Barty, senior consultant for financial policy at Policy Exchange, suggests that the state shouldn't be taking such risks with our money when discussing another state-backed bank, RBS:
Arguments that the government should wait for shares to recover to the price originally paid before privatising are misplaced.
The longer the banks remain in government hands, the more damage is potentially done, and the less the banks will be worth. And the government’s original purchase was not made as an investment, it was made to stabilise the financial system and allow the banks to rebuild.