Lloyds Banking Group PLC (ADR) (NYSE:LYG) (LON:LLOY)’s recent stake sale by the UK government is well-timed (politically), according to a recent report from Ian Gordon of Investec plc (LON:INVP) (LON:INVR) (OTCMKTS:IVTJF).

Lloyds Banking

The UK government sold about 6 percent in its first sale of its stake in Lloyds Banking Group PLC (ADR) (NYSE:LYG) (LON:LLOY) shares, generating £ 3.2 billion.

Lloyds Stake Sale Well-Timed

As reported earlier, UK Financial Investments Ltd oversees the government stake sale. In a statement issued today, UKFI indicated that it sold 4.28 billion shares for 3.2 billion pounds. The shares were priced at 75 pence, a 3.1 percent discount to yesterday’s closing price. However, the price is higher than the 73.6 pence the UK government originally paid after providing a 20-billion pound bailout during the financial crisis in 2008.

Investec plc (LON:INVP) (LON:INVR) (OTCMKTS:IVTJF) feels UKFI has quite sensibly chosen to take advantage of the recent upsurge in the Lloyds Banking Group PLC (ADR) (NYSE:LYG) (LON:LLOY) share price by disposing of an initial 4.3 billion shares at 75 pence, a 3.1 percent discount to last night’s close.

Lloyds shares shot up by about 58 percent so far this year until yesterday.

UKFI confirmed that no further sale of the taxpayer’s remaining 32.7 percent stake would be made for a further 90 days.

Investec plc (LON:INVP) (LON:INVR) (OTCMKTS:IVTJF) observes with the ‘soft’ 90-day lock-up, and with the Lloyds Banking Group PLC (ADR) (NYSE:LYG) (LON:LLOY)’s shares trading at its near-five-year-high, the government’s timing is impeccable. Investec also feels it appears credible to suggest that it could yet be out in full by the election.

RBS Value-Destructive

Earlier, the Chancellor George Osborne indicated Royal Bank of Scotland Group plc (ADR) (NYSE:RBS) (LON:RBS), which received a 45.5 billion-pound rescue, is still constrained by too many poor assets to be sold.

Investec plc (LON:INVP) (LON:INVR) (OTCMKTS:IVTJF) feels though Lloyds Banking Group PLC (ADR) (NYSE:LYG) (LON:LLOY) still remains 32.7 percent Government-owned, it has not been subject to the same level of value-destructive ‘political interference’ as Royal Bank of Scotland Group plc (ADR) (NYSE:RBS) (LON:RBS).

Government’s Recent Initiatives Positive For Lloyds

Bank of England’s recent ‘Funding for Lending’ facilitated the housing recovery spreading beyond London and the South-East.

Besides this, the UK government announced a ‘Help-to-Buy’ plan to provide interest-free loans to buyers of newly built properties.

Investec plc (LON:INVP) (LON:INVR) (OTCMKTS:IVTJF) feels many of the government and Bank of England’s policy such as the ‘Funding for Lending’ and overt support for housing market through the ‘Help to Buy’ schemes have been particularly positive for Lloyds Bank.

Investec notes that despite Lloyds’ reported profitability currently remaining anemic, Lloyds Banking Group PLC (ADR) (NYSE:LYG) (LON:LLOY) will be able to achieve RoE greater than its CoE by 2016. Besides Investec feels the tail-risks attached to Lloyds too diminished considerably.

However, Investec plc (LON:INVP) (LON:INVR) (OTCMKTS:IVTJF) retained its ‘sell’ recommendation on Lloyds Banking Group PLC (ADR) (NYSE:LYG) (LON:LLOY) with a RoE-g/CoE-g derived 65 pence target price.