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Institutions target of next Lloyds sale

Monday, February 17 16:59:38

Britain wants to sell the vast majority of its next Lloyds share offering in March or April to institutions and may offer a small number to retail investors despite uncertainty over its dividend, bank and political sources said.

Retail investors favour stocks that pay dividends because of the near-term income they provide, whereas institutional investors are usually prepared to take a longer view.

Lloyds was rescued through a 20.5 billion pound ($34 billion) government bailout during the 2008 financial crisis, leaving taxpayers with a 39-percent stake.

Having sold a 6 percent stake last September, the government wants to sell the remainder before the next election in 2015 and Finance Minister George Osborne has said some shares will be offered to the public "when the time is right".

The Treasury and advisory group UK Financial Investments (UKFI) are discussing whether to include a retail component in the next sale but some officials believe they should wait until Lloyds dividend prospects are clearer. Its failure to pay a 2013 dividend disappointed some analysts and investors.

The bank said last week it would approach Britain's financial regulator in the second half of 2014 about starting to pay dividends again at a modest level, meaning investors would not receive a payout for another 12 months.

UKFI, which manages the government's stake, will be free to sell more shares once the bank's annual report has been published in early March.

Banking and political sources say the most likely outcome is a sale to institutions such as pension funds and insurers followed by a larger offering including retail investors later in the year or in early 2015. The Treasury and UKFI have taken no final decision on various options under consideration.

One of the sources told Reuters the government could look to sell up to a quarter of its remaining shares in the sale to institutions, potentially raising more than 4.5 billion pounds, compared with the 3.2 billion raised in the first sale.

Other complications may arise if Scotland votes on Sept. 18 to become independent from England. Lloyds, owner of Bank of Scotland, is registered in Edinburgh and a "yes" vote would have significant implications for the bank, including possibly moving its registered headquarters to London.

In the weeks leading up to that vote, the government may not be able to sell any shares because of uncertainty over the bank's future, the sources said. (Reuters)