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LONDON, June 19 (Reuters) - Britain is ready to startselling its shares in Lloyds Banking Group and willexamine whether to break up Royal Bank of Scotland (RBS), Finance Minister George Osborne said on Wednesday.
The government is keen to show Britain's part-nationalisedbanks are recovering from the 2008 financial crisis. A sale ofpart of its 39 percent stake in Lloyds, at a profit, would allowit to claim at least partial success.
Osborne said the government is considering options forselling shares in Lloyds. He said the first sale would likely beto institutional investors such as pension funds, but he wouldconsider all options for subsequent sales, including sellingshares to the public.
"Nothing better signals Britain's move from rescue torecovery than the fact that we can start to plan for our exitfrom government share ownership of our biggest banks," Osbornesaid in his annual speech to financiers in the City of London.
The government pumped a combined 66 billion pounds ($103billion) into the banks to keep them afloat during the 2008financial crisis, leaving it with an 81 percent shareholding inRBS and a 39 percent stake in Lloyds.
A sale of shares in Lloyds has been seen as more realisticthan an RBS sale as its shares are already trading above thegovernment's break-even price of 61.2 pence, having been the topperformer in the FTSE-100 last year. In contrast, thetaxpayer is still sitting on a loss of nearly 10 billion poundson the government's investment in RBS.
Osborne said a sale of RBS shares remained some way off. Inthe meantime, he said the government would urgently investigatethe case for hiving off its soured property loans into a 'badbank', leaving the remaining 'good bank' better able to lend toBritish households and businesses.
A decision on whether or not to split RBS will be made thisautumn after the review has been completed. Osborne said hewould not consider a "good bank/bad bank" split if it meant afurther injection of capital or a larger government stake.
Osborne previously had rejected the idea of breaking up RBS,saying it would be too expensive.
However, the Parliamentary Commission on Banking Standards,which he set up last year to examine the industry, said onWednesday that the current state of RBS was creating problemsfor banking competition and for the British economy.
"If the operational or legal obstacles are insuperable, thegovernment should tell Parliament why," commission chairmanAndrew Tyrie said.
