UK's NAO says taxpayers lose out on Lloyds share sale

December 17
9:18 PM 2013

The National Audit Office said taxpayers lost £230 million or $374 million in the sale of shares in Lloyds Banking Group undertaken by the UK government in September instead of the initially reported profit, Bloomberg reported.

Citing a report by the government-spending watchdog published today, the report said that the purchase price of the shares showed that taxpayers gained £120 million on the sale. However, the NAO said that this was overshadowed by the cost of borrowing to purchase the holding.

The report quoted NAO as saying that the deficit "should be seen as part of the cost of securing the benefits of financial stability during the financial crisis, rather than any reflection on the sale process." It added that the sale gave value for money and was effectively managed by UK Financial Investments Ltd or UKFI, the firm which oversaw the stake of the government.

Bloomberg reported that the £3.2 billion sale of Lloyds shares was seen as a victory for George Osborne, the Chancellor of the Exchequer, in his quest to reverse the bailouts started by the previous Labor government during the financial crisis. It was the first move to return the largest mortgage lender in Britain to full private ownership.

In an emailed statement to Bloomberg, Financial Secretary to the Treasury Sajid Javid said, "As the National Audit Office's report says, 'this first sale represents value for money.' The proceeds from the sale have reduced the national debt by over half a billion pounds."

The NAO report also added that UKFI was charged no fees for the September sale by the bookrunners of the deal, allowing it to save around £4.8 million. UKFI also got 25% of the commission amounting to £4.7 million that the bookrunners obtained when it sold the shares to the investors.

One of the recommendations given by the NAO to the Treasury is to factor in financing costs when deciding future deals, the report said.

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