Lloyds shares weakening after government sale

The price for a six per cent stake in Lloyds has been announced - 75p per share. A small discount on the bank's current market value, and set to raise £3.21bn as the government reduces its stake from 38.7 per cent to 32.7 per cent.

The government sale was covered 2.8 times by demand from investors, according to Reuters.

Joe Rundle, head of trading, ETX Capital:

A small exit by the UK government but welcome news still. It’s the government’s first round in offloading the total stake in the bank, five years after the bailout. With the UK elections in 2015, the coalition government appear to be playing the re-privatisation of Lloyds strategically by gradually selling ahead of the elections – the government has said the next stake sale will not be for another 90 days.

Putting the politics aside, the move to offload the 6% stake is very welcome, particularly for the UK banking sector which continues to suffer from a mixture of scandals, litigation and poor reputation amongst the UK public. Lloyds has turned out to be a model student versus RBS which has been unable to repair its finances as quickly and as efficiently as Lloyds. Under the leadership of CEO Antonio Horta-Osorio, Lloyds has returned to profitability and its shares have rallied in response – the bank continues to deleverage, a task which management at RBS has found difficult to keep up with.

Many will see this as a symbol of the UK’s financial system returning to health as institutional investors snapped up the shares on offer, an indication that the market feels far more comfortable with the UK banking sectors’ prospects given the upswing we are seeing in the UK economy. Lloyds itself is a leveraged play on the UK economy for investors – if you believe in the UK recovery, Lloyds is the likely long play versus the likes of riskier banks RBS and Barclays.