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Share sale looms for bank

Treasury ‘looking to sell Royal Bank of Scotland at a loss’

RBSThe newly-elected Conservative government is considering a sale of shares in Royal Bank of Scotland at a loss, according to a report today.

George Osborne, the re-appointed Chancellor, has been determined to get the bailed-out banks off the government’s books as quickly as possible, so a sale, even at a discount, will come as little surprise. However, it is thought the government was dissuaded from suggesting the idea during the election campaign.

A sale of Lloyds shares in a public issue was unveiled as an election pledge by Prime Minister David Cameron, but Lloyds is an easier deal as its shares are trading above the price at which the government bought them.

The government bailed out RBS in 2008 at around 500p a share, paying £45.5 billion and they have been trading well below that figure.

However, Treasury officials have seen readjusted the average price 407p and they touched 404p in February. They are now back at around 350p following the announcement of further losses.

Given the lack of upside it the shares, the Treasury appears to have decided that it either sits on its 80% stake, potentially for years, or cuts its losses and realiseswhat value it can.

A sale of RBS shares at a loss will prompt criticism, not least from those who will remind the government that it sold Royal Mail too cheaply. However, selling them early in the parliament would be an astute move so that the issue is long in the memory when the next election comes round in 2020.

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.

 

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