Lloyds branch sale may see government offloading its shares

Britain’s competition regulator has approved plans by Lloyds Banking Group to sell 631 branches, potentially clearing the way for the coalition government to start selling its shares in the bank this week.

Lloyds must sell the branches, which it has rebranded under the TSB banner, as a penalty for receiving a £20.5bn (€24.4bn) bailout during the 2008 financial crisis, which left Britain holding a 39% stake.

Britain’s Office of Fair Trading (OFT) said yesterday it was happy with Lloyds’ plans, provided it strengthens TSB’s balance sheet prior to a sale of the business next year.

Lloyds said it would make changes to enhance TSB’s profitability by over £200m in aggregate in its first four years.

The OFT’s backing for the plans will remove uncertainty and help clear the way for the government to start selling its shares in the bank, sources with knowledge of government thinking said yesterday.

Shares in Lloyds hit a 3-year high on Tuesday as expectations mounted the British government could start selling its shares this month.

Sources have said it is considering selling around a quarter of its 39% stake — worth about £5bn.

The OFT also said yesterday that plans by RBS to sell 315 branches would result in a credible lender to small businesses with sales of between £1m and £25m.

The OFT expects it will have the ability to compete and grow over time and has not recommended any changes to the plan.