Banks jostle for role in looming state sale of Lloyds and RBS

More than a dozen top banks are finalising plans to run a £20 billion (€23 billion) share sale in part-nationalised Lloyds, one of the most prestigious British deals in recent years, but with fees cut to the bone.

Banks need to pitch by Monday to handle the sale of the government's 39 per cent shareholding in Lloyds and – later – its 81 per cent of Royal Bank of Scotland (RBS), the agency which manages the government's shares says.

UK Financial Investments will pick a shortlist, possibly about eight banks, which it can turn to at short notice. A Lloyds sale may start this year with as much as £5 billion worth its holding up for sale, industry and political sources say.

Bankers said all the big names from Wall Street and the City of London would be bidding, even though fees for government work are far less lucrative than for private firms. “There’s more honour at stake than there is money,” said a senior investment banker involved in the process.

Fees could be below the usual 0.5 per cent for a government sale and may be as low as 0.1-0.2 per cent if the government opts to give the banks advisory roles rather than the more risky taking on of blocks of stock to sell on, bankers said.

Above breakeven
British chancellor of the exchequer George Osborne said last month the government was ready to start selling its Lloyds shares, which are trading comfortably above the government's breakeven price, having hit a two-year high in June.

The treasury has not yet said how it will structure the sales. Banks have been asked to pitch for four roles: bookrunner; co-lead manager; capital markets adviser; and financial and/or strategic adviser.

All the major banks are likely to tender, including US firms JPMorgan, Bank of America Merrill Lynch, Morgan Stanley, Citigroup and Goldman Sachs. At least as many Europeans are expected to pitch, including Barclays, Deutsche Bank, UBS, Credit Suisse, HSBC and Rothschild.

All banks declined to comment.

The treasury has asked banks to submit fee structures in six blocks: accelerated bookbuilds above and below £3 billion, full market offers – which could include share sales to retail investors – of above and below £5 billion, and equity-linked structured product sales above and below £2 billion. – (Reuters)