* UK sells 7.8 pct stake in Lloyds Banking Group at
* Sale cuts government's holding in Lloyds to under 25 pct
* Government could be out completely by 2015 election
* Share price dips 4 pct to 76 pence
(Adds analyst comments, details)
By Steve Slater
LONDON, March 26 The UK government has sold 4.2
billion pounds ($6.9 billion) worth of shares in Lloyds Banking
Group to cut its stake in the country's largest retail
bank to under 25 percent and putting it on course for a complete
exit in the next year.
Finance Minster George Osborne said Wednesday's sale
"represents good value for the taxpayer" and the proceeds would
be used to reduce the national debt.
"It is another step in repairing the banks, in reducing our
national debt and in getting the taxpayers' money back," Osborne
Britain's taxpayers stand to make a slim profit on the 20
billion pounds pumped in to rescue Lloyds in 2009, which
analysts and bankers said should encourage the government to
speed up its exit.
Banking sources have said another sizeable sale is expected
this summer or autumn and a full exit is possible before the
general election in May 2015.
"Ideally they want to be out before the next election but a
lot depends on market conditions," said Gary Greenwood, analyst
at Shore Capital.
The next sale is expected to include an offer to retail
investors, which sources familiar with the matter said will be
easier to do once there is greater clarity over the prospects
for Lloyds resuming dividend payments.
UK Financial Investments, the body that manages the
government's stakes in both Lloyds and Royal Bank of Scotland
, said on Wednesday it sold a 7.8 percent stake in
Lloyds, or 5.6 billion shares, at 75.5 pence a share.
It marked the biggest ever share sale via the accelerated
book building process outside of the United States.
The sale, at a 4.6 percent discount to Tuesday's closing
price, cut Britain's holding in Lloyds to 24.9 percent and gave
a profit to the average 73.6p at which the government bought the
The offer was 1.7 times covered at the sale price, a person
familiar with the matter said. Half of the investors came from
Britain, 30 percent from the United States, 10 percent from Asia
and 10 percent from continental Europe, the source said.
Britain began to offload its 39 percent holding in Lloyds
last September, when shares were sold at 75p apiece. That was
seen as a milestone in the country's recovery from the 2008
financial crisis, when taxpayers pumped a combined 66 billion
pounds into Lloyds and RBS.
The sale is a vindication for Lloyds' chief executive
Antonio Horta-Osorio, who has restored the bank to profitability
since his appointment in 2011, simplifying the business to focus
on lending to UK households and businesses.
"Lloyds has done the bulk of the hard restructuring work and
in terms of looking like a normal bank, it is pretty much there
and that's reflected in the performance of the shares over the
last 18 months and the valuation it's on," Greenwood said.
Lloyds shares were down 4 pct at 76p by 0938 GMT, but have
surged 58 percent since the start of 2013 and trade on 1.5 times
their book value, the highest valuation of any UK bank.
UKFI said it will not sell any more shares before June 23.
Analysts said RBS's turnaround is several years behind
Lloyds and it could take at least two to three more years to
start reprivatising the lender, and even then the government
might have to accept a loss.
Bank of America Merrill Lynch, JP Morgan, Morgan Stanley and
UBS were bookrunners for the Lloyds sale and Lazard was an
adviser to UKFI.
(Editing by Greg Mahlich)