LLOYDS Banking Group made a tentative step towards recovery yesterday as it launched a discounted £4bn share placing, just a day after chairman Sir Victor Blank announced his retirement.
In a move that signals a fresh start after the Blank regime left the bank 43 per cent state-owned, Lloyds said it would use the cash call to repay the preference shares held by the government.
Shareholders are being offered 0.6213 shares for every share they own at 38.43p, a 57 per cent discount on Friday’s closing price, likely to prove attractive to institutions. Any shares not taken up will be sold into the market and profits returned to shareholders, with the government acting as underwriter.
If the offer is fully subscribed, as expected, the government’s stake will remain at 43 per cent, but if the shares are rejected, its stake would rise to 65 per cent.
Paying back the preference shares would save the bank £480m a year in dividend payments to the Treasury, strengthening its capital base. Combined with its participation in the asset protection scheme, the bank expects its core tier 1 ratio to reach 14.5 per cent.
The cash call follows Sunday’s announcement that Sir Victor Blank would be standing down as chairman. New trade minister Mervyn Davies and Lloyds’ new deputy chairman Lord Leitch are among the favourites to succeed him.