The Treasury said the move marked a “significant milestone” in returning Lloyds back to the private sector.
The latest share sales, conducted through the trading plan, have reduced the government’s remaining shareholding to less than 6%.
The Chancellor of the Exchequer, Philip Hammond said: “Returning Lloyds to the private sector and recovering all of the cash the taxpayer injected into the bank during the financial crisis is a priority for the government.
“Confirmation that we are no longer the largest shareholder in the bank and that we’ve now recouped over £18bn for UK taxpayers is further evidence that we are on track to recover all of the £20bn injected into the bank during the financial crisis.”
A trading plan involves gradually selling shares in the market over time, in an orderly and measured way.
The Lloyds trading plan initially ran from 17 December 2014 to 30 June 2016. The government announced on 7 October 2016 that further sales of Lloyds shares would also be made through a trading plan.
However, the Treasury withdrew the planned retail sale of its final 9.1% stake in Lloyds, blaming ongoing market volatility.
Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: “Retail investors had the disappointment of being denied involvement in a Lloyds share sale, although there is still time and plenty of opportunity to rectify this with the remaining c. £2 billion stake.
“Today’s announcement confirms that more shares have been sold to the institutions through the trading plan and the taxpayer is no longer the largest shareholder in Lloyds.”