The City toasted the success of the first sale of taxpayer-owned shares in Lloyds Banking Group today after £3.2 billion worth of shares were snapped up by UK and US institutional investors.

The shares were sold in less than five hours last night through joint bookrunners BoA Merrill Lynch, JP Morgan Cazenove and UBS.

The placing price of 75p was a 3 per cent discount to last night’s closing price of 77.36p, which bankers described as a good result for what was the second largest share placing ever on the London stock market. Today the shares dipped 1.79p to 75.57p.

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The sale reduces the Government’s stake in Lloyds from 39 per cent to 33 per cent and it has promised not to sell any more shares for at least 90 days.

The next share sale, which could come early next year, is expected to be open to private investors as well as institutions.

Although the sale of a 6 per cent stake was smaller than the 10 per cent which many in the City had predicted, advisers pointed out that it had been a political imperative that the first sale of shares from the £45 billion bail-outs of Lloyds and Royal Bank of Scotland was a success. The sale may also have been scaled back because investors face a flood of new bank shares, with Barclays’ £6 billion rights issue and the flotation of TSB next year.

Chancellor George Osborne welcomed last night’s shares sale, saying: “If you look at what has happened over the last 12 hours with Lloyds, you have investors from around the world investing in a British bank. That is a sign the British economy is turning a corner.”

Based on the average price of 73.6p a share which the taxpayer paid in three separate parts of the bailout during 2009, the Treasury has made a modest cash profit of just £61 million. But on the 63.1p price which UK Financial Investments (the holder of the taxpayer shares) prefers to use, which is after fees paid by the bank to the Treasury, the paper profit is £586 million.

While neither Lloyds nor UKFI paid any fees to the bookrunners they will have picked up about £16 million by charging commission of about 0.5 per cent to the buyers of the shares.

The success of the share sale was seen by many investors as testimony to the recovery of Lloyds under chief executive Antonio Horta-Osorio. He is in line for a £1.5 million share bonus, paid in five years’ time, provided the share price remains above 73.6p for the next month.

Investec analyst Ian Gordon, who rates Lloyds shares a sell with a price target of 65p, stuck his neck out, saying: “We regard the Government’s timing as impeccable, and it appears credible to suggest that it could yet be out in full by the election.”

While the first sale of Lloyds shares has made a modest profit, the much larger 81 per cent stake in RBS is still nursing a huge loss. The shares were down 7.5p at 359p today against an average bail-out price of 471p.