By Thomas Cullen,
International Business Writer
The U.K. government announced on Monday, September 16 that it will be selling 3.3 billion pounds worth of their 20.5 billion pound share in Lloyds Banking Group Plc, as reported by express.co.uk.
This will result in a drop of 6 percent worth of the total 38.7 percent claimed by U.K. taxpayers, which is being managed by U.K. Financial Investments. The bank, which currently employs more than 45,000 people, was bailed out by the government during the financial crisis of 2008 along with the Royal Bank of Scotland.
The total bailout of both banks was to a tune of 66 billion pounds and it was designed to make sure that these banks did not completely fail and plunge the ailing economy further into a recession.
Each share sold back is worth 75 pence and the number of shares sold back totals 4.28 billion, said Bloomberg. The 6 percent stake being sold back will rake in approximately 3.2 billion pounds. The Chancellor of the Exchequer—who is responsible for overseeing the economic and financial matters of Great Britain—George Osborne, said that the money acquired will be returned to U.K. taxpayers so that some debt can finally begin to be paid down.
This sale will improve confidence that the U.K. is showing economic progress, as reducing debt is always looked upon favorably by economists and global financial leaders.
The reason behind conducting the sale was explained by a spokesman for the Treasury, who said that, “We want to get the best value for the taxpayers, maximize their support for the economy, and restore them to private ownership…the government will only conclude a sale if these objectives are met.”
This is a good sign for the British economy because not only are the bank’s books improving, but they are also doing well enough to begin the process of re-privatizing. The British government, like many other governments today, is in debt, but it is not expecting the money that will be acquired to put a significant dent in it.
In essence, it is the first step in a long process. However, this is still important to the nation because it shows that the banks can hold its own and keep their word by repaying the taxpayers for bailing them out. It is especially meaningful to the banks as they will continue to need loyalty from their customers to be successful.
One of the reasons for the improvement in the health of the company is the appointment of Antonio Horta-Osorio as the CEO in 2011. He was able to streamline operations by doing business mainly with U.K. households and businesses which resulted in profits being brought back to the company.
When asked about the stake sale, Horta-Osorio said that, “I believe this reflects the hard work undertaken over the last two years to make Lloyds a safe and profitable bank that is focused on supporting the U.K. economy.” It will be interesting to see if the U.K.’s financial system can keep up this progress in the coming years as the global economy continues with its sluggish recovery.
One thing is for sure though, and that is positive steps are being taken today to ensure growth and stability for the future.
A version of this article appeared in the Tuesday, Sept. 24 print edition.
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