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Who is in the frame for the Lloyds share sale?

The institutional placement of the first tranche of the UK government’s stake will be one of the prized mandates of 2013.

George Osborne’s Mansion House speech in June set the ball rolling for the UK government to begin selling off its 39% stake in Lloyds Banking Group.

Osborne has signalled that the first tranche will be a sale targeted at institutional investors. Retail investors will have to wait their turn.

The institutional sale is likely to take place after the summer break, perhaps before the end of the first quarter, say bankers close to the situation.

It could see the government sell about 25% of its stake, or around 10% of the bank’s stock. With Lloyds market capitalization around the £45 billion mark, that suggests a share sale worth about £4.5 billion – making it one of the most important global equity mandates of the year.

UKFI, which manages the government’s stake, will decide the bookrunner group. It has asked banks to submit their proposals by July 8. Lloyds executives are also likely to have a big say in which banks get the key roles.

It seems unlikely Barclays or HSBC will be chosen for the institutional sale, given their positions as rival UK retail banks, although their UK distribution capabilities will put them firmly in the frame for the later retail-targeted tranches.

Lloyds Banking Group’s two corporate brokers Bank of America Merrill Lynch and UBS will expect their close relationship with the bank to secure them senior roles.

Deutsche Bank and Credit Suisse have been key advisers to UKFI for some time, which gives them a head start in the race.

The two leading US investment banks, Morgan Stanley and Goldman Sachs, will also hope to be involved. Morgan Stanley has played a pivotal role in advising Lloyds on the sales of its non-core asset portfolio, while Goldman’s appeal to the UK authorities was demonstrated a month ago when it was appointed global coordinator for the privatization of Royal Mail, alongside UBS.

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