UK begins disposal of RBS stake
BRITAIN has sold a £2.1bn stake in Royal Bank of Scotland to begin the disposal of its holding seven years after rescuing the bank, sparking a political row that the sale was being hurried.
BRITAIN has sold a £2.1bn stake in Royal Bank of Scotland (RBS) to begin the disposal of its holding seven years after bailing out the bank, sparking a political row that the sale was being hurried.
Chancellor of the Exchequer George Osborne yesterday hailed the start of returning RBS to the private sector, saying it was right to commence selling at a loss to the price paid in the 2008 rescue.
“While the easiest thing to do would be to duck the difficult decisions and leave RBS in state hands, the right thing to do for the economy and for taxpayers is to start selling off our stake,” Mr Osborne said.
The sale of shares at 330p each cuts the state holding to 72.9% from 78.3% and marks a milestone in Britain’s recovery from the financial crisis of 2007-09, at the peak of which RBS was rescued with £45.8bn of taxpayer cash.
The divestment had been on the cards since Mr Osborne said in June he was keen to start a selloff, even though the government was selling at a loss given the shares were bought at an average price of 502p.
The opposition Labour Party criticised the sale. “RBS had to be bailed out urgently, but it doesn’t have to be sold off at the same speed,” said Chris Leslie, shadow finance minister.
“The chancellor needs to justify his haste in selling off RBS while the bank is still awaiting a US settlement for the misselling of subprime mortgages.”
Mr Leslie was referring to a potentially massive fine that US authorities might impose on RBS, related to historic sales of US mortgages.
RBS has set aside £2.1bn for a settlement but has said the timing of a deal is uncertain and analysts estimate it could cost as much as £9bn.
Mr Osborne accelerated the timetable for selling the bank after his Conservative Party won the UK election in May.
He has lost no time since then in pressing on with his plans for the economy, including the sale of more shares in Lloyds Banking Group and a budget that included a shift away from welfare spending to higher wages for workers.
UK Financial Investments (UKFI), the body that holds the government’s stake, said it disposed of 630-million shares, or 5.4% of the bank, at 330p each in a quick-fire sale to institutional investors after the market closed on Monday.
UKFI sold more shares than it had indicated on Monday, when it had announced plans to sell 600-million. The shares were sold at a 2.3% discount to RBS’s closing price on Monday. This was narrower than the 3.1% discount on the government’s first sale of Lloyds shares in September 2013.
The RBS sale was 2.4 times covered by investors, with 48% being UK-based, 37% from the US and 15% from elsewhere.
CEO Ross McEwan said he was pleased about the start of the sell-down, which reflected the progress RBS had made “to become a stronger, simpler and fairer bank”.
RBS was briefly the world’s biggest bank by assets, but it has more than halved its assets and the size of its investment bank, and sold businesses in the US and around the world.
The RBS sale was handled by Citigroup, Goldman Sachs , Morgan Stanley and UBS.