Government poised to sell off stake in Lloyds

The Office of Fair Trading has reported to government on the split of Lloyds Banking Group and Royal Bank of Scotland.

Lloyds Banking Group this week oversaw the relaunch of the TSB but the OFT has recommended that it further strengthens its balance sheet to improve profitability and allow TSB to grow market share faster.

David Green, director at Arlingclose treasury consultants said: “This should be the last hurdle for Lloyds to clear before the Government can start to sell down its stake. And with the share price currently favourable but volatile, I wouldn’t be surprised to see an announcement on this in the near future.”

The OFT also recommended that key services such as IT, which are provided by Lloyds “do not limit TSB’s ability to compete in the future.” The relaunch of the bank on Monday was marred by TSB’s website crashing and customers being unable to access their accounts.

On Royal Bank of Scotland the OFT said it thought a spin off would “result in a credible small and medium-sized bank” for businesses with £1-£25m in turnover. No changes were recommended to the current plan.

Chancellor George Osborne said that the introduction of the ‘challenger’ banks would increase competition and choice in banking. Vince Cable, Secretary of State for Business said that significant structural problems remain in the sector, particularly in lending to small businesses. “We must not forget the potential implications of a ‘good bank/bad bank’ split of RBS,” he added. “Today’s OFT report did not consider these, and work on a possible split is continuing separately.”