LONDON (The Deal) -- The British government has postponed plans to sell shares in Lloyds Banking Group (LYG) to retail investors this September, in a move that may mean the public will not get a look-in at all before next May's general election.
The decision leaves it open to the Treasury to sell shares to institutional investors, but a voter-pleasing sale to the public is now considered too difficult to pull off until after the bank resumes paying the dividends it was forced to suspend after a government bail-out in 2008.
The British government still holds about 25% of the bank, despite two institutional placings this year that reduced the holding from about 43%. The bank recently applied to the Bank of England for permission to restart paying dividends, but no longer expects to do so before next year, most likely also in May.
The decision comes after the stock market's Spring rise lost momentum over the summer as the tensions with Russia over Ukraine continued to mount. The government had hoped for Lloyds' share price to rise to near the 84 pence at which the government would stand a chance of recouping both the cost of the original bail-out and the accumulated cost of borrowing the cash for the rescue.
Lloyds shares are currently trading at 74.3 pence, below the 75.5 pence offer price of the government's 4.2 billion euro sale last March. A sale to the public would have to be at an even larger discount to that price than an institutional placing to be attractive.
The Treasury has so far ruled out a retail sale only to the end of the year. However, the political timetable as well as Lloyds' own financial calendar would make it hard to find a suitable slot between the Chancellor of the Exchequer George Osborne's final pre-election budget in March and the election itself in early May.