UK Raises Stake in Lloyds Banking

123jump.com Staff
09 Mar, 2009
New York City

U.K. government increases stake in Lloyds Banking Group. The government will replace its preference shares of 4 billion pounds to common shares to be issued at 38.4 pence a share. UK government holding in the lender may surge to 65%. Luxury home prices fall 1.5% in February.

[R]1:00PM New York, 6:00PM London- U.K. government increases stake in Lloyds Banking Group. Luxury home prices fall 1.5% in February.[/R]

London stocks ended flat gains in commodity stocks were offset by a weakness in realty stocks after luxury home prices fell in February.

In London trading FTSE 100 index rose 0.3% or 11.67 to 3,542.40.

Of the FTSE 100 index stocks, 30 advanced, 70 declined, and 2 were unchanged. Aviva Plc led gainers in the index shares with a rise of 8.4% followed by Tullow Oil increasing 7.9% after finding more oil in Ghana’s Tweneboa-1 Field.

U.K. Government Shores Stake in Lloyds Banking

U.K. Treasury reported on Saturday that the government and Lloyds Banking have agreed to participate in the Asset Purchase Scheme and the UK government has also agreed to convert its preference shares in Lloyds to ordinary shares.

Through the agreement, Lloyds will place £260 billion of assets into the Asset Protection Scheme, especially those considered to have the greatest degree of uncertainty about their future performance.

The lender will pay a participation fee of £15.6 billion to the Treasury in capital and in case of a loss Lloyds will shoulder a first loss amount after existing impairments of up to £25billion.

In addition, Lloyds will make lending commitments of £3 billion of mortgage lending and £11 billion of business lending over the next 12 months.

The financial institution will also review its existing remuneration policy and implement a policy consistent with the detailed principles set out in the Financial Services Authority’s (FSA) Code of Practice on Remuneration Policies.

Government will replace the Treasury’s £4 billion of preference shares in Lloyds with new ordinary shares, “with the aim of supporting stability in the financial system; ensuring continued protection for ordinary savers, depositors, businesses and borrowers; and safeguarding the interests of the taxpayer”.

New ordinary shares will be issued at 38.4 pence per share and the preference shares will be replace at 101% of the issue price, including the accrued dividend.

Government will take up its pro-rata share of the open offer and retain its voting share at 43.5% and underwrite additional shares not taken up by their shareholders.

The report notes that if Lloyds shareholders opt not to buy the ordinary shares, the government’s holding of ordinary shares in Lloyds will soar to 65%.

Luxury Home Prices Fall 1.5% in February

Knight Frank LLP, the property broker reported in an e-mailed statement today that luxury house prices- with a value of more than £1 million- fell 1.5% in February from a month ago, while prices plunged 23% in 2008.

London luxury properties are presently being targeted because of low prices and a weaker pound, while viewings across all categories of luxury homes increased 28% in February from the comparable year ago period.

Knight Frank also noted that sales of houses and apartments valued at more than £10 million- edged up in February after slackening in the past five months.

Gainers and Losers

Aviva Plc led gainers in the FTSE 100 index shares with a rise of 8.4% followed by increases in Tullow Oil of 7.9%, in BP of 5.9%, in Lloyds Banking of 4.1%, and Amec Plc of 3.8%.

Tullow Oil gained after finding more oil in Ghana’s Tweneboa-1 Field.

Land Securities led decliners in the FTSE 100 index shares with a fall of 10% followed by losses in British Land Co. of 9.8%, in London Stock Exchange of 8.5%, in Xstrata of 8.1%, and Legal & General of 7.3%.

Europe Markets Review

In London FTSE 100 Index closed higher 11.67 or 0.33% to 3,542.40, in Paris CAC 40 Index decreased 15.16 or 0.60% to close at 2,519.29 and in Frankfurt DAX index higher 25.62 or 0.70% to close at 3,692.03. In Zurich trading SMI decreased 3.94 or 0.09% to close at 4,307.67.