Broker snap: Investec rates Lloyds as 'sell' as reprivatisation speculation ramps up

10th Jun 2013 10:21

Investec has retained its 'sell' rating and 50p target price for part-nationalised lender Lloyds as speculation continues to increase ahead of a potential reprivatisation.Media reports this weekend suggested that the Chancellor George Osborne is looking to take advantage of the recent strength in the bank's share price and go ahead with an initial 10% sale of the government's 39% stake.Analyst Ian Gordon said: "We are supportive of such a strategy. Buy shares which are cheap - sell shares which are expensive!"However, the proposal from the Policy Exchange - which would see 70% of the government's holding sold to institutional/private shareholders and 30% sold to the public at no cost - is "more ambitious", Gordon said.Under this plan, the analyst explained that the sale to institutions would establish a 'floor price' for the mass distribution and when the public elects to sell shares in the future, they would keep 100% of the profit, with the 'floor' going back to the government."Although Policy Exchange rightly identifies an element of technical support from 'enforced' index-fund buying of the shares, net net, we would expect issuance on this scale to weigh on the shares, pulling the share price back towards fair value," Gordon said."However, through the eyes of the Chancellor, the financial and political attractions of such an approach may yet prove considerable."He said he sees "little justification for the share price to react favourably" under this plan.The stock was down 0.21% at 62.19p by 10:20.