The government is selling Lloyds Bank – but should you buy?

Governments are notoriously bad at market timing. One of the best investment opportunities of the century so far came when Gordon Brown started selling Britain's gold reserves in the early 2000s for example. So now that the government is flogging off its stake in Lloyds, should you be interested?

We'll get to that in a moment. First, let's take a look at what's happened. Various City institutions have together bought a 6% stake in Lloyds from the government and paid 75p a share.

That's slightly ahead of the 73.2p in price' paid by the government when it rescued Lloyds from collapse in 2008. The government will receive £3.2bn from the sale. Treasury coffers will probably get a further boost next year, as the government sells more of its remaining 32.7% stake.

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It does look as though chancellor George Osborne has chosen a good time for a sale the shares have jumped by 90% over the last year.

And it's interesting that this initial share sale has been placed with large institutional investors. There has been no opportunity for private investors to get involved with a big retail share sale (although of course there's nothing to stop private investors from buying shares on the open market).

Institutional placings make sense where possible, because they can be done quickly and have lower costs than a big retail offer. You're also more likely to sell at the highest possible price with a placing. Today's 75p sale price is only 3% lower than last night's closing price for Lloyds. Private investors would normally expect a larger discount to the prevailing share price.

That said, there's still a good chance that we'll see a bigger retail share offer at some point. I suspect that Osborne won't be able to resist the opportunity to create a pre-election feel-good factor' by selling some Lloyds shares at a seemingly cheap price.

So should you buy shares in Lloyds?

What's more, the current share price values Lloyds at 1.4 times book value. That's in line with HSBC, which has a much better track record and didn't need any government bailouts.

Remember also that Lloyds is now very much a UK-focused bank with a large exposure to the UK housing market. Yes, house prices look set for a good run in the short-term, but things are much less clear in the medium and long-term, and there's a significant chance that Lloyds will get caught out by more bad debt.

However, these are concerns for the longer run. On the flipside of the debate, as my colleague Phil Oakley pointed out recently, there's the point that, regardless of what you might think of Lloyds as a company, the government has a vested interest in making sure that its share price heads higher, at least in the run-up to the 2015 election.

With the government behind the housing market (which Lloyds depends on) and also keen to recreate that 80s feel-good privatisation feeling, there's a strong wind behind Lloyds. It's not a buy and hold stock, but if you're in the market for a pre-election trade, he reckons it might just be a buy for the bold.