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State's holding reduced

Taxpayer loses £1 billion as Treasury offloads RBS shares

Ross McEwanThe taxpayer lost about £1 billion on its stake in Royal Bank of Scotland today after the government offloaded 5.4% of its holding at a loss.

The shares were priced at 330p, in line with a prediction in Daily Business yesterday. The sale will raise £2.079 billion, reducing the state’s holding from 78.3% to approximately 72.9%. 

Citigroup Global Markets, Goldman Sachs International, Morgan Stanley International and UBS acted as bookrunners in connection with the placing to City institutions.

Rothschild advised the government on the sale which was criticised by the Labour party as taking place at the wrong time. The shares were bought for 502p in 2008 to rescue the bank with a £45.8 billion injection of taxpayers’ cash.

However, Chancellor George Osborne argues that the bank needs to return to the private sector and the government has privately admitted that it was better to begin this process now to help normalise the banking sector.

He said: “This is an important first step in returning the bank to private ownership, which is the right thing to do for the taxpayer and for British businesses: it will promote financial stability, lead to a more competitive banking sector, and support the interests of the wider economy.

“Now is the time for RBS to rebuild itself as a commercial bank, no longer reliant on the state, but serving the working people of Britain.”

The Treasury will be hoping that the sale – on the back of second quarter profits – will stimulate an appetite in RBS and that further sales of shares will be at higher prices. This would follow a pattern set in the US which has been able to return its banks to the private sector.

Huge fines in the US are still hanging over RBS will cast a shadow over the price but the underlying business is now felt to be on the road to recovery.

In a statement issued this morning, Ross McEwan (above), RBS chief executive, said:  “I’m pleased the government has started to sell down its stake. It’s an important moment and reflects the progress we are making to become a stronger, simpler and fairer bank. There is more work to be done but we’re determined to build a bank the country can be proud of.”

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