What does Govern­ment sale of RBS stake mean for in­vestors?

The govern­ment is tak­ing a hit by sell­ing down some of its RBS shares

Shares - - CONTENTS -

Shares in Royal Bank of Scot­land (RBS) are un­der pres­sure af­ter the UK Govern­ment sold part of its hold­ing in the bank, but it could ul­ti­mately prove an im­por­tant step in the com­pany’s re­ha­bil­i­ta­tion.

Long suffering share­hold­ers in RBS are hav­ing an in­ter­est­ing year. The bank fi­nally set­tled with the US De­part­ment of Jus­tice, agree­ing to pay a £3.6bn fine for mis-sell­ing mort­gage-backed se­cu­ri­ties in the run-up to the 2008 fi­nan­cial cri­sis.

This deal cleared the way for the Govern­ment to start sell­ing its 70.1% stake in the bank and on 5 June it con­firmed the sale of 920m shares, or 7.7% of the bank.

This crys­tallises around a £2bn loss for the UK tax­payer as the shares were sold at 271p. This is well be­low the 500p per share entry point at the height of the fi­nan­cial cri­sis.

Joseph Dick­er­son, an­a­lyst at in­vest­ment bank

Jef­feries, says the move is a ‘positive liq­uid­ity event’ for RBS shares and one step on the path to ‘value cre­ation’.

He says the next step to creat­ing value will be the an­nounce­ment of an or­di­nary div­i­dend this year, share buy­backs in 2019 and the re-de­ploy­ment of ex­cess liq­uid­ity be­tween now and 2020. Dick­er­son is a buyer of RBS with a bullish price tar­get of 423p. (DS)

Newspapers in English

Newspapers from UK

© PressReader. All rights reserved.