CORRECTED-UK Treasury red-faced over Lloyds sale release error

Fri May 30, 2014 1:41pm EDT

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(Corrects final paragraph to show press release was from UKFI and not the Treasury)

By Steve Slater

LONDON May 30 (Reuters) - Britain's finance ministry mistakenly released potentially market-moving information on Friday and blamed a website error for erroneously saying it planned to sell 4 billion pounds ($6.7 billion) of shares in Lloyds Banking Group.

The government is not planning to sell the shares, and the release was "completely erroneous", a Treasury spokesman said. "The Treasury is urgently looking into why this happened," he said.

People familiar with the matter said investors should not read anything into the release, which was received by news organisations, about any plans by the government to sell more of its stake in Lloyds soon.

Such information is highly market sensitive and if reported could have caused Lloyds shares to fall. Lloyds shares briefly dipped in the minutes following the email release at 1359 GMT, but recovered to close up 0.4 percent at 77.75 pence.

Britain still owns a quarter of Lloyds, after selling two blocks of shares in the bank in September and March. The stake is held by UK Financial Investments (UKFI).

An email, headlined "Press release: UKFI announces its intention to dispose of approximately 7.5% of Lloyds Banking Group plc (test)", was sent to people who had signed up for automatic releases on the gov.uk website, a site for government information.

The emails, triggered when a document was mistakenly uploaded to the website, carried a link to a statement on the site which said UKFI planned to sell 5.35 billion shares by a placing to institutional investors. The page was later deleted.

The headline and statement were in fact repeats of a press release sent out on March 25 but they had Friday's date on them. Friday's versions also had "(test)" on them.

At least two reporters at Reuters received the release, and other news organisations also received it.

Lloyds shares fell 4 percent on March 26 after Britain sold 5.6 billion shares, worth 4.2 billion pounds.

Under the terms of that sale, UKFI agreed not to sell any more until June 23, although such lock-up agreements can be waived.

The timing of the next government stake sale in Lloyds is under close scrutiny. The shares are above the level of the last sale and the government is expected to sell more shares this year, possibly including an offer to retail investors.

UKFI said it was not selling any Lloyds shares and the old UKFI press release was published in error "following routine website testing" on the gov.uk website. "We are conducting an urgent review into how this happened to make sure this does not happen again," it added in a statement.

Lloyds declined to comment.

($1 = 0.5982 British Pounds) (Editing by Pravin Char and Erica Billingham)

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