Britain amends Lloyds bank share sale on market unrest

Britain's Treasury on Friday said it would no longer offload its final tranche of shares in state-rescued Lloyds Banking Group to the public, preferring institutional investors because of market volatility.

"Ongoing market volatility means it is not the right time for a retail offer," finance minister Philip Hammond said in a statement.

The London stock market and pound have experienced sharp swings since Britain voted on June 23 to exit the European Union, with the benchmark FTSE 100 index nearing a record high thanks in large part to sterling striking 31-year lows against the dollar.

Banks' share prices have meanwhile suffered, with their retail margins cut after the Bank of England slashed its main interest rate to a record-low 0.25 percent to ward off the threat of recession following the Brexit referendum.

"Shares of Lloyds dropped five percent (Friday) after the government abandoned its plans to offer shares to the public," noted CMC Markets analyst Jasper Lawler.

"The volatility in banking shares had made a sale to the public too risky. The government exiting its stake will ultimately be a good thing for the business, but not in the short term."

The Treasury on Friday said it had launched a "trading plan" for Lloyds Banking Group (LBG), which will see a gradual selling of the remaining 9.1-percent stake over a 12-month period.

The switch means Hammond has scrapped a plan by his predecessor George Osborne to launch a retail sale before the end of the year -- after a previous postponement blamed also on market volatility.

Since the height of the financial crisis eight years ago, the state has recovered around 16.9 billion pounds ($21 billion, 18.9 billion euros), or more than 80 percent of the bailout cost of LBG.

"A trading plan will ensure the government gets back all of the 20.3 billion pounds that taxpayers injected into Lloyds during the financial crisis," Friday's statement added.