Monday 8 August 2016 5:18 pm

Government could pocket £2.7bn in profit if it sold Lloyds shares now

The government could rake in more than two billion pounds in profit if it shed its remaining shares in Lloyds Banking Group today, new research has found.

The analysis by Hargreaves Lansdown discovered, thanks to a cocktail of dividends, fees received for underwriting loans and previous share sales at higher prices, it could turn a profit of £2.7bn if it sold its remaining stake at current share prices, which have been hovering around 54p and closed up 2.1 per cent today at 54.29p.

UKFI, the organisation which manages government's holdings in Lloyds and RBS, would only need to offload the remaining Lloyds shares for 7.5p each to break even, the research also found.

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Previously, government – which pumped more than £20bn into the bank in 2009 and still holds a nine per cent stake – has only let go of its holding when shares are above the 73.6p mark, which is thought to be the price where a sale would become profitable. 

Since 2009, it has made around £16.6bn selling off its shareholding, has already or is due to receive dividends of £373m and received £2.9bn in fees from the bank. By Hargreaves Lansdown's calculations, it is therefore only £488m short of recouping everything it initially put in for the bailout. 

"The government has now made enough money from the Lloyds bailout that it can comfortably make good on its promise to offer shares to the public, while still making a tidy profit for the Treasury," said Laith Khalaf, senior analyst at Hargreaves Lansdown. "However the changes to the Cabinet following the referendum have raised questions over whether the government still intends to proceed with the public offer of Lloyds shares.

"City institutions are no doubt licking their lips at the prospect the new Chancellor might cut private investors out the Lloyds share sale. But this would be taken as a breach of trust by hundreds of thousands of retail investors, who have been repeatedly told by the government that a share offer is coming."

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A Lloyds spokesperson said the share sale was "a matter for UKFI".

UKFI declined to comment. The Treasury has not yet responded to City A.M.'s request for comment. 

The recent vote for Brexit has done banking sector shares few favours, as prices plummeted across the globe on 24 June. Lloyds' own share price is down over a fifth on its 23 June value of 72.15p. 

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Last month, it was speculated that new chancellor Philip Hammond could rush out a sale on the government's remaining Lloyds stake, even though share prices looked long off recovering to 73.6p.