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Institutions to pay about £2 billion

Treasury kicks off RBS share sale and long return to private sector

RBS GogarburnThe government kick-started the long-awaited and long return of Royal Bank of Scotland to the private sector today by indicating it would be selling a stake worth £2 billion at a loss.

UK Financial Investments, the body that holds the government’s stakes in the bailed out banks, is offloading about 600 million shares, representing 5.2% of the bank, to institutional investors.

It will reduce the taxpayers’ holding in RBS from 78%  to 73.2%.

The sale was pre-empted by Chancellor George Osborne in June when he said he was keen to start disposing of shares in the bank as soon as possible. He hopes to sell at least three-quarters of the stake over five years.

It will see a gradual return of the bank into private hands after it was rescued by the Labour government in 2008 with a£45.8 billion injection of public funds.

The rescue deal followed its over-ambitious takeover of Dutch bank ABN Amro which coincided with the credit crunch and a collapse in confidence in the financial system.

Labour bought shares in RBS at an average price of 502p, although they are on the government’s books at 455p which includes returns from fees. But even at this lower break even price the sale of shares at an expected price of about 330p represents a substantial loss.

The shares closed at 337.6p.

RBS last week revealed a second quarter profit, helping to pave the way for today’s decision.


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