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George Osborne: "The money will be used to reduce the national debt by over £0.5bn"
The government has sold a 6% stake in Lloyds Banking Group at a price of 75p a share, raising £3.2bn.
The disposal cuts the government's stake in Lloyds from 38.7% to 32.7%.
The sale represents a cash profit of £61m for the Treasury, which BBC business editor Robert Peston said was a good deal.
"If the chancellor said a year ago that there would have been a cash profit on this deal, it would have been laughable," he said.
"From the perspective of where things were a year ago it is a good outcome."
Shares in Lloyds closed at 77.36p on Monday. During 2008's bailout, the government purchased Lloyds shares at an average price of 73.6p.
The Chancellor, George Osborne, has previously said that 61p a share would be a level at which the government would break even.
End QuoteSome may query whether George Osborne should have waited for a better price - although experienced investors know that waiting for the best price means never selling"
In a tweet, Mr Osborne said Tuesday's sale was positive for the taxpayer, and an "important step" in plans to "get their money back and repair [the] economy".
He added in a letter to the chairman of the Treasury Committee Andrew Tyrie, that he "will consider all options for later sales of our shareholding in Lloyds, including a retail offering to the general public."
The shares that have now been sold were offered to institutional investors, not to the public. The next sale of Lloyds shares is expected to include an element aimed at retail investors. The government will not sell any more of its Lloyds shares for 90 days.
'No room for complacency'In August, Lloyds reported that it had returned to profit. The bank made £2.1bn ($3.2bn) in the six months to the end of June, compared with a loss of £456m for the same period last year.
During the financial height of the crisis, £20.5bn was pumped into Lloyds by the government.
Lloyds TSB took over the ailing HBOS in 2009, leaving the taxpayer with a 43% stake in the newly formed Lloyds Banking Group.
Continue reading the main storyThe bank's share price has almost doubled in the past year, although it fell 2% in morning trading following news of the stake sale.
Analyst Ian Gordon of Investec said that many aspects of government and Bank of England policy, such as the Funding for Lending and Help to Buy schemes had been "distinctly positive" for Lloyds.
This view was echoed by Lord Myners, who was City Minister when Lloyds was rescued by the government.
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He told the BBC's Today Programme: "One of the reasons Lloyds has proved so popular is investors are attracted by what's happening in the housing market in the UK at the moment... but there are still some bad debts lurking in there."
He said that while the news of the Lloyds sale was welcome, he cautioned: "The crisis of the last five years is not over... there is no room for complacency."
'Safe and profitable'While the government's stake in Lloyds is now reduced to 32.7%, it still retains an 81% stake in Royal Bank of Scotland (RBS), which it is not expected to sell in the near future.
RBS received a £45bn bailout in 2008, and in 2009 the bank reported the biggest annual loss in UK corporate history.
The government bought RBS shares as part of its bailout at 502p a share. They are currently worth 360p.
Business Secretary Vince Cable said in August that an RBS sale was not likely for "at least five years".
Lloyds Banking Group Chief Executive, António Horta-Osório said that he was "pleased" with the progress made.
"I believe this reflects the hard work undertaken over the last two years to make Lloyds a safe and profitable bank that is focused on supporting the UK economy," he said.
Demand from the US for Lloyds shares has been reported as high, with stronger than expected interest from institutional investors.
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