TAXPAYERS look set to claw back cash from Lloyds Banking Group after the bank’s £4bn fundraising call gained strong backing from investors.

Part-nationalised Lloyds – 43.4 per cent owned by the taxpayer – is raising money to replace £4bn in Governmentowned preference shares with ordinary shares.

The move is likely to raise about £2bn for the bank from other investors to help pay off the Government’s preference shares, which were issued last summer and cost it £480m in dividend payments every year.

The strong appetite for the fundraising, with 87 per cent of the new shares sold, comes because the stock was on sale at well below the current market price.

The shares were formally issued at the Lloyds annual meeting in Glasgow last Friday, during which angry shareholders demanded answers over the bank’s “disastrous”

takeover of toxic debtladen HBOS.

The bank’s chairman, Sir Victor Blank, is to stand down. He faced strong criticism from many of the 1,000 shareholders at last week’s meeting over his part in the takeover. If all shareholders had snubbed the move, the taxpayers’ stake could have risen to 65 per cent.

Under the terms of the deal, the remaining 13 per cent of the shares will be sold in the open market, with any profits above the 38.43p offer price split among investors who did not take part in the fundraising.

Any shares not sold at this point will be bought by the Treasury as underwriter and added to the taxpayer stake in Lloyds, which, as chief financier to offshore company SeaDragon, pulled the plug on the SeaDragon oil rig project in the North-East earlier this year. The project would have seen £300m of investment in the region and the creation of 1,000 jobs.

Results for the share issue so far show that Lloyds has been able to raise more than £1.7bn from investors outside of the Government.

While the price of shares was about half that of the current market value, the investor support will be welcomed, despite the challenges facing the bank.

The extent of the support from Lloyds’ army of about 2.8 million private shareholders – who together own just under ten per cent of the bank – is less clear.

Lloyds is expected to move into the red this year following more losses at struggling HBOS, which it rescued at the height of the crisis last autumn.