Chancellor keen to offload bank
RBS share sale on agenda as hunt begins for broker
City sources say it is inviting investment banks to pitch for the role of corporate broker which would act as adviser for the bank to institutions who are potential buyers.
As reported by Daily Business on 10 May, George Osborne, the re-appointed Chancellor, has been determined to get the bailed-out banks off the government’s books as quickly as possible and may be prepared to sell slugs of RBS shares at a loss.
It is thought the government was dissuaded from suggesting the idea during the election campaign, but it will feel that a sale early in this parliament would allow any furore to die down by the time the government returned to the electorate.
Morgan Stanley and UBS already act as brokers to RBS but the government may want a third bank to specifically deal with a privatisation process.
At the current price, it is sitting on a £13 billion loss on its £45bn purchase of shares when it bailed out the bank in 2008-09.
The government paid around 500p for RBS shares. However, Treasury officials have since readjusted the average price to 407p and they touched 404p in February. They are now back at around 350p following the announcement of further losses.
The government held talks with the Abu Dhabi Investment Authority in 2012 about selling a stake and there remains a possibility that an overseas wealth fund will snap up a stake in the bank.
Last summer it was reported that UK Financial Investments, which manages the government-held stakes, was approached about a series of small stake sales to kick start the process.
The bank believes that the government should sell an initial tranche of shares worth about £5 billion to test the market.
Selling small tranches was the method used in the US, creating an appetite for the shares and therefore enabling the government to sell each trance at a higher price.
The government also wants to dispose of its remaining 19.93% stake in Lloyds Banking Group which currently trades above break even.
Lloyds said it would pay a dividend of 0.75p per share, amounting to £535m to be split among the bank’s three million shareholders, with the largest share, £130m, going to the government.