Newspaper article International Herald Tribune

Britain to Trim Stake in Lloyds Bank

Newspaper article International Herald Tribune

Britain to Trim Stake in Lloyds Bank

Article excerpt

The chancellor of the Exchequer said a breakup of Royal Bank of Scotland was also possible.

The British government is preparing to sell part of its holding in Lloyds Banking Group and is weighing a breakup of Royal Bank of Scotland, the chancellor of the Exchequer has said.

The comments Wednesday were the clearest sign yet of the government's approach to the two banks, which were rescued during the financial crisis. Nearly five years later -- and with a general election on the horizon -- questions have been raised about when the government might be able to whittle down the taxpayers' 39 percent stake in Lloyds and 82 percent stake in the R.B.S.

At the annual Mansion House dinner here attended by senior financial executives, the chancellor, George Osborne, said the government was "actively considering options for share sales in Lloyds."

While giving no timetable, he said that a sale of the first block of shares was likely to go to institutional investors, noting that Lloyds was in a "good position," with investor appetite increasing.

But he said that any decision on R.B.S. -- whose chief executive, Stephen Hester, surprised investors by announcing his departure last week -- was still "some way off."

One possibility was to put the bank's troubled assets into a "bad bank." In hindsight, Mr. Osborne said, "splitting R.B.S. into a good bank and a bad bank was probably what should have happened in 2008."

Now, he said, "we will urgently investigate the case for taking the bad assets -- those mistakes of the past -- out of R.B.S."

The Treasury, Mr. Osborne said, would look in particular at putting the bank's British commercial real estate holdings and its Ulster Bank subsidiary into the "bad bank."

But he added, "We're not prepared to put more taxpayer capital into R.B.S. as part of this process." He said that a decision on the bank would be made in the autumn. …

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