high conviction lloyds investors pleased

Fund managers were optimistic of prospects for Lloyds Banking Group shares after the government sold a 6% stake in the bank for £3.2bn, or 75p per share.

high conviction lloyds investors pleased


Shares in the bank were down 2.24% in morning trading following the sale, but this did not bother managers with high conviction holdings in Lloyds.

Steve Davies, co-manager of the Jupiter UK Growth Fund and manager of the Jupiter Undervalued Assets Fund, said the government’s share sale was “great news for Lloyds and its shareholders”.

He holds 8.7% of the Undervalued Assets Fund in Lloyds and 8.2% of the UK Growth Fund in the bank, as at 31 July, making Lloyds the top holding in both funds.

“We would expect the government to continue selling its stake in stages over the coming months and attention may now turn to a potential retail offer as part of the next tranche.

“While this is far from straightforward from an administrative viewpoint, it would allow taxpayers to share in the potential for further upside, particularly if it can become a substantial dividend payer once again.”

Bigger sales to come

Following its share sale, the government still holds 32.7% of the bank, down from 38.7%. A cash profit of £61m was realised on the price the government purchased the shares for back in its 2008 bailout.

Shares in Lloyds had closed at 77.36p on Monday, so the government’s sale price of 75p per share was at a small discount. Institutional investors from across the globe were buyers in a book that was run by JP Morgan, Bank of America Merrill Lynch and UBS.

Ignis Asset Management’s Ralph Brook-Fox, manager of the firm’s Ignis Balanced Growth Fund, said: “I’m encouraged by the successful placing of a £3.2bn stake in Lloyds at a modest discount after a period of share price strength. Although a smaller amount than predicted by some, to me it strikes the right balance between getting the process underway with the removal of an immediate overhang, while at the same time seeking to maximise overall value for the taxpayer by wating for potentially supportive news flow for further disposals.

“These might include the third quarter or full year results, coupled with the conclusion of dividend negotiations with the PRA. The macro environment in part helped by anticipation of the full implementation of “help to buy” could also bode well for future performance.”

Brook-Fox’s fund has 5.5% invested in Lloyds, making it his second-largest holding.



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