The UK government has started selling its 38.7 per cent stake in Lloyds Banking Group.
UK Financial Investments (UKFI), the unit of the Treasury which is handling the sale of Lloyds and Royal Bank of Scotland, said it received £3.21bn for disposing 6% of the lender to institutional investors at a placing price of 75p per share.
The government paid an average price of 73.6p per share when it bailed out the bank in 2008 for £20m so the sale represents a £61m cash profit.
However, since the average market price at the time was 61p, the government booked the difference as a loss and added it to the national debt - so on paper the sale represents a profit of £586m.
UKFI said there would not be a further sale of the taxpayer's remaining 32.7% stake place for another 90 days.
Chancellor George Osborne started the initial share sale on Monday night.
"Five years ago the previous government forced British taxpayers to put a huge sum of money into bailing out the banks," he said.
"That was a big ask of the British public. I have been determined ever since I became Chancellor to get that money back for taxpayers."
Osborne said the proceeds of the sale will be used to reduce national debt by over half a billion pounds.
"This is another step in the long journey in putting right what went so badly wrong in the British economy; it's another step in repairing the banks; it's another step in getting the money back for the taxpayer; and it's another step in reducing our national debt," he added.
"If you look at what has happened over the last 12 hours with Lloyds, you have investors from around the world investing in a British bank. That is a sign the British economy is turning a corner."
Investec analyst Ian Gordon said the government has quite sensibly taken advantage of the recent strength in the bank's share price.
Lloyds trades on 1.4 times 2013 estimated tangible net asset value and close to a near-five year high, he said.
"UKFI has, quite sensibly in our view, chosen to take advantage of recent strength in the Lloyds share price by disposing of an initial 4.3bn shares
at 75p - a 3.1% discount to last night's close," Gordon said.
The broker retained a 'sell' rating and a 65p target pricing for the company's stock. While Lloyds profitably remains "anaemic", there will be a reducing drag from net negative exceptional items.
"Importantly, we see the tail-risks which attach to Lloyds as significantly diminished. We believe that incremental mis-selling charges will be well below the £8.2bn cumulative redress provisions of the past 30 months," Gordon added.
In August, Lloyds reported first-half profits of £2.1bn, compared with a loss of £456m for the same period last year, as bad debts fell 43% to £1.8bn.
The group, however, had to pay a further £450m to cover compensation for the mis-selling of payment protection insurance (PPI).
Lloyds recently reopened its Trustee Savings Banks (TSB) on the High Street as a stand-alone brand to meet competition rules by the European Commission. TSB, which merged with Lloyds in 1995, will open 631 branches England, Scotland and Wales.