UK govt may start RBS stake sale
03 August 2015
The British government is set to begin selling its majority stake in banking giant the Royal Bank of Scotland Plc (RBS), seven years after it was bailed out, according to latest media reports.
The lender was rescued using over £45 billion of taxpayers' money at the height of the global financial crisis in 2008.
The British treasury through the UK Financial Investments currently holds about 79-per cent in RBS which it bought at a price of 500 pence a share.
The move would follow the stake-sale of Lloyds Banking Group, another lending major rescued by a £21-billion bailout by the government. The treasury has so far cut its stake from 43 per cent to under 15 per cent, raising more than £13 billion through the share sale.
It is expected that chancellor George Osborne is planning to offload £2.5-billion worth of RBS shares to financial institutions within the next few days.
In June, Osborne said that the government plansned to accelerate its drive to return the banks to full-private ownership.
''It's the right thing to do for British businesses and British taxpayers. Yes, we may get a lower price than Labour paid for it. But the longer we wait, the higher the price the whole economy will pay,'' Osborne said.
He further stated that when the banks are considered in total, taxpayers get back billions more than they were forced to put in.
According to reports, the move is tentative and could be held up for a month or more.
The treasury declined to comment on the potential stake sale.
At a closing price of 341 pence on Friday for RBS shares, the government stake is worth approximately £31 billion, which indicates a potential loss of over £14 billion for the entire stake.
The stock's pre-crisis peak was over 6,800 pence in March 2007.
Since its government bailout, RBS has cut back several of its international operations shedding over £1 trillion of assets.
The bank has not churned a profit since its bailout. Last year, it reported its lowest annual loss of £3.5 billion, down from £9 billion in the previous year.
Last week, RBS registered a loss of £153 million for the first half to the end of June after keeping provisions for potential legal issues.
Its chief executive Ross McEwan, said the bank would not be able to pay dividends until early 2017 due to restructuring costs and litigation payments. About £1.3 billion has been kept aside for legal settlements.
In May, a New York court ordered RBS and Japanese banking giant Nomura to pay a collective fine of £516 million ($806 million) to US state-owned mortgage firms Freddie Mac and Fannie Mae. (See:Nomura, RBS ordered to pay $806 mn to housing finance agency)