Lloyds said it is now in a position to start repaying the taxpayer after reporting bumper profits yesterday.
The Government had to bail out the bank in 2008 at the height of the financial crisis, with the taxpayer footing the £20.3bn bill.
Yesterday Lloyds chief executive Antonio Horta-Osorio said: “The Government now has a clear chance to give the taxpayer a profit. We’re really proud of that.”
He added that it is up to the Government to decide “when and how they do it”.
“We have completed the first phase,” he said.
“The share price is now in a position where the Government can return taxpayers’ money at a profit,”
Lloyds’ shares jumped eight per cent to 74p yesterday, well above the 61p that the Government regards as break-even on its bailout.
The Prime Minister David Cameron is keen to show that the UK’s bailed out banks are on the road to recovery and to reward the taxpayer with a profit on an investment that most were unhappy to make.
A profitable sale of part of the state’s 39 per cent stake in Lloyds would enable Mr Cameron to claim that the taxpayer won’t be left out of pocket from the bailout.
Royal Bank of Scotland, the other bank the Government bailed out with billions of pounds of taxpayers’ money during the 2008 financial crisis, is still struggling to recover.
Analysts expect the Government to sell blocks of shares with institutional investors.
It is expected to sell around a quarter of the £20bn loan either this month or in September.
The Government reiterated that is has no set timetable or target price for starting the sale of its 39 per cent stake.
A spokesman for the Treasury said: “The Government has set out its plan to take Britain’s banking system from rescue to recovery. As part of this, we have said that we are now actively considering options for sales of the taxpayers’ shares in Lloyds.
“We have also consistently said we have no set timetable or target share price for beginning the return of Lloyds to the private sector.”