Last updated: November 29, 2013 1:04 pm

George Osborne to hint at sale of bailed-out bank

Lloyds bank©Bloomberg

George Osborne is to give his strongest signal yet that he wants to move Lloyds Banking Group back into private ownership by the 2015 general election, albeit not at a price that would leave taxpayers out of pocket.

The chancellor will refuse to lay out a specific “timetable” on the sale of government stakes in either RBS or Lloyds in his annual Mansion House speech on Wednesday, according to aides.

He will indicate that Lloyds is closer to a privatisation than RBS, reflected in its healthier share price. But, while the Treasury wants a Lloyds sell-off before 2015, it is cautious about boxing itself into a rigid timeline about the timing or price of any share sales.

Mr Osborne will be implicitly criticised by the UK’s independent banking commission in its report this week for failing to set out a clear strategy to return the banks to full health. The Parliamentary Commission on Banking Standards will say the strategy for RBS is not working and does not serve the economy well, urging the government to consider all options including a break-up of the bank.

The chancellor’s speech will dash hopes in some quarters that he was poised to set out detailed plans for the state’s exit from the two banking groups.

Some officials have hinted that the Lloyds sell-off could even begin within the next six months, but Mr Osborne is not expected to endorse that view publicly.

Industry observers have noted that Lloyds shares have reached 61p, the average price at which the stake is booked in the state accounts. But to get back the full government injection of £20bn the price would need to rise a 20 per cent to 73.6p.

Mr Osborne will say the government has moved from the “rescue” phase for the banks into a “transition phase”.

“We want to sell both as soon as we can but only if we get value for taxpayers,” said one coalition official.

RBS is further away from a sale than Lloyds with the share price at £3.16 compared to the rescue price of up to £5.

Stephen Hester, departing RBS chief executive, said at the weekend that the full £45bn privatisation of the bank could take up to a decade in several tranches.

We want to sell both as soon as we can but only if we get value for taxpayers

- Coalition official

Mr Osborne will also stress the importance of the financial services industry to Britain’s economic stability in the Mansion House speech. He will urge banks to do more to support the “real economy” and say bankers need to listen to criticism of their ethics and sometimes irresponsible behaviour.

The banking commission will recommend a new professional banking standards body; long-term bonus deferrals; making it easier for consumers to switch accounts; and restrictions on bank bonuses for high-volume retail sales.

Pat McFadden, a Labour committee member, said there had been a “serious misalignment” between risk, responsibility and reward in banking.

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