The UK government plans to sell the last chunk of its shares in Lloyds Banking Group next March by playing off retail investors against large institutions.

The treasury said it was planning a retail offering of Lloyds shares worth at least £2 billion. But the government also intends to run a parallel offering of a similar size for institutional investors, such as hedge funds and asset managers.

Retail investors will be offered shares at a 5 per cent discount to the market price, and receive one bonus share for every 10 they hold for more than a year up to the value of £200, the Treasury said. Senior Lloyds executives and government officials expect the share sale will allow the treasury to complete the privatisation of the bank, which was bailed out after its disastrous takeover of HBOS during the crisis.