Lloyds Banking Group Plc (LLOY) will probably sell a “significant proportion” of its remaining 22 percent stake in St. James’s Place Plc (STJ) in the first two weeks of December, according to Panmure Gordon & Co.
Shares of St. James’s Place have climbed about 8.9 percent since Britain’s biggest mortgage lender last reduced its holdings in the London-based wealth manager in May. The 180-day restriction period on selling shares agreed at the time of the placing has since expired, paving the way for Lloyds to further reduce its stake to less than 10 percent, according to Panmure.
“Lloyds will place at least 12 percent,” Barrie Cornes, a London-based analyst at Panmure with a buy rating on the stock, said in an e-mailed note to clients today. They “could conceivably push for a full exit, albeit the discount required may rule out such a course of action.”
Matt Smith, a spokesman at Lloyds, declined to comment.
Shares of St. James’s Place have dropped for the past three weeks, the longest stretch of declines since August. The stock is still up 49 percent this year, the second-best performer on the FTSE 350 Insurance Index after Prudential Plc.
The London-based lender has been reducing its stake in the wealth manager to raise additional capital required by the regulator. St. James’s Place shares yesterday closed at 622 pence in London. That’s above the 580 pence apiece sale price on May 23 and 510 pence in the March 12 transaction.
Lloyds’s core Tier 1 capital ratio under Basel III rules, a measure of financial strength, was at an estimated 9.9 percent at the end of the third quarter, up from 8.1 percent at the end of 2012. The sale of its Scottish Widows Investment Partnership unit for 560 million pounds to Aberdeen Asset Management Plc (ADN) earlier this month will add about 11 basis points, it said.
Cornes said Lloyds will probably sell its shares after the Thanksgiving holiday in the U.S. this week and before the market starts to wind down for Christmas in mid-December.
“We welcome the fact that the Lloyds overhang is finally being addressed and as such we see the short-term disruption as being merely a blip,” Cornes wrote.
Lloyds purchased the wealth manager as part of its acquisition of HBOS Plc in 2008, a transaction that forced the bank to seek a 20 billion-pound bailout that left the government owning 39 percent of the lender.
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