Investec says government sale to constrain Lloyds' stock, regardless of election outcome

LONDON (ShareCast) - News that the Conservatives want to sell discounted shares in Lloyds to the public if they win the election should not alter the investment case for the bank, according to Investec (LSE: INVP.L - news) . However, the broker kept a 'hold' rating on the stock, saying that the inevitable sale of the government's stake, whoever comes into power, will weigh on the share price over the next 12 months.

The Tory government, which has already reduced its stake from 43% in 2009 to 22% as of Monday, has been transparent in its plans to offload a further £9bn of shares during the 2015/16 fiscal year.

However, Investec reckons that if Labour in particular comes into power, they would still see the plan through given their commitment to lower the deficit.

"In our view, the next government (of whatever political colour) is most unlikely to be precluded from achieving the currently targeted £9bn of sales in 2015/16.

"However, the political/regulatory backdrop, coupled with the technical impact of such an increase in supply, is likely to act as a continuing constraint to material share price progression over the next 12 months." Lloyds was trading 0.05% up at 78.79p by 11:13 on Monday.