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* Sale cut government stake in Lloyds to 23.9 pct
* Shares sold above 73.6 pence average buy-in price
* Sale a step towards full return to private ownership (Adds details on method of sale, future sale prospects)
By Matt Scuffham
LONDON, Feb 23 (Reuters) - Britain's finance ministry hasraised 500 million pounds ($769 million) through the sale of afurther one percent stake in Lloyds Banking Group,cutting its holding to below 24 percent.
The sale moves Lloyds another step towards a full return toprivate ownership after Britain pumped 20 billion pounds intothe bank during the financial crisis of 2007 to 2009, leaving itwith a 41 percent shareholding.
"This is further progress in returning Lloyds Banking Groupto private ownership, reducing our national debt and gettingtaxpayers' money back," Britain's finance minister GeorgeOsborne said in a statement on Monday.
UK Financial Investments (UKFI), which manages thegovernment's stakes in bailed out banks, hired Morgan Stanley inDecember to sell Lloyds shares on the stock market through a"pre-arranged trading plan".
The sales since made by Morgan Stanley, all at a price abovethe 73.6 pence average price that the government paid, havetaken the government's stake down to 23.9 percent from 24.9percent when the trading plan was launched. They also take thetotal amount raised by the government so far from selling downits stake in Lloyds to just under 8 billion pounds.
Lloyds shares traded 0.8 percent higher at 78.60p at 0815GMT on Monday.
Lloyds is expected to announce its first dividend since itsrescue on Friday, increasing the bank's appeal to investors andmaking it easier for the government to offload its remainingshares. Prior to its bailout, Lloyds had a record of being oneof the highest dividend paying stocks in Britain, handing overhalf its profit to shareholders in 2005 and 2006.
UKFI had previously raised 7.4 billion pounds through twoseparate sales to financial institutions such as pension fundsand insurers. Those sales were made using an 'acceleratedbookbuild' with the shares sold overnight while the stock marketwas closed.
In contrast, Morgan Stanley is seller smaller amounts ofshares on the open market and has been mandated to continue todo so until the end of June.
After that, industry sources said UKFI could look to makeanother larger sale to institutions or offer shares to privateretail investors.
A sale of shares in Britain's other bailed-out bank RoyalBank of Scotland is unlikely in the next two years, thesources said.
Shares in RBS are trading well below the price thegovernment bought them at, leaving taxpayers sitting on a lossof nearly 10 billion pounds. ($1 = 0.6503 pounds) (Editing by Keith Weir)
