Osborne urged to begin selling off Lloyds stake - but insiders say don't expect action soon

Part of the government stake in Lloyds Banking Group could be sold off imminently thanks to the recent surge in share prices, UK Financial Investments (UKFI) has told chancellor George Osborne.

UKFI is the agency charged with managing the taxpayer stake in Lloyds Banking Group. Sky News, who first reported the story, cited sources in the Treasury saying they UKFI was "actively considering" a sale this week - what they see as the last viable opportunity for a big share trade before September.

However, insiders told City A.M. that, while UKFI agrees with chief executive Antonio Horta-Osorio that the bank is ready for privatisation, that decision is now in the hands of Osborne. We're told not to expect any announcement this week - the announcement is more likely to come in around three months. The Treasury agreed, saying it is in "no rush" to sell off the 39 per cent government stake.

Yesterday, the share price of Lloyds surged over 76p per share as chief executive Antonio Horta-Osorio reportedly told investors he hopes to return up to 70 per cent of the bank’s earnings in dividends to shareholders by 2015. The bank head's potential £2.2m bonus is linked to a government sale and the bank's share price.

And last week, the share price of Lloyds passed the 73.6p per share mark (what the government paid to bail out the bank) as it reported a return to profit, a fall in bad debts and plans to open new branches this year. Shares today closed down 1.89 per cent, but still held above this level at 74.26p.

A number of analysts have upped their predictions for the Lloyds share price, with the most notable being UBS's upward revision to 100p per share.

Here's City A.M.'s Tim Wallace on why the government should sell its stake off soon.