Mass-market Lloyds privatisation delayed

The Treasury looks set to delay the first massive popular privatisation since the 1990s - of a big chunk of its holding in Lloyds - from the spring to the autumn, following advice from UK Financial Investments, the agency set up by the government to manage taxpayers' stakes in the big banks.

However, another sale of £3bn of shares or more to investment institutions could happen almost at any time, since Lloyds' shares continue to trade well above the 73.6p per share taxpayers paid to rescue the bank in the autumn of 2008.

So why has UKFI recommended against an immediate disposal of Lloyds shares to millions of individuals?

Well as I understand it, there are two reasons:

1) Stock markets have been a bit more volatile over the past few months, and the problem with a big retail offer is that the government would have to hold the offer open for longer, taking greater risk on the proceeds it would receive. By contrast, a pure sale to investment institutions could be done overnight.

2) Lloyds' recovery has been a bit slower than investors had been expecting, partly because of bigger compensation payments for PPI mis-selling and partly because the underlying recovery is taking a little longer than planned (as shown by a postponement by a few months of the moment when regulators are likely to allow Lloyds to resume paying dividends).

A government source told me: "We are now focusing our preparations on a possible retail offer in the autumn, by which time we should be able to do something bigger and more universal than the limited retail offer that would have been possible in the next few months."