RBS sale may begin this week
Reports suggest George Osborne will begin the government sell-off of the Royal Bank of Scotland (RBS) as early as this week, following the release of the bank's results last Thursday. The sale, at between &pound;2bn to &pound;3bn, will be at a loss to taxpayers; however, in this year's Mansion House speech he stated that the loss would be overridden by profits from the sale of other bailed out banks such as Lloyd's.
The starting pistol could be fired on the government sell-off of its stake in Royal Bank of Scotland as soon as this week.

Advisers to George Osborne are still deciding whether to recommend to the chancellor that now is the right time to go ahead with the disposal.

Speculation about a possible share sale has mounted since RBS published its half-year figures on Thursday, presenting the first opportunity to approach investors about buying shares.

The first share sale is likely to be pounced upon by Osborne as evidence that the banking sector is pulling out of its 2008 crisis, when £45bn was ploughed into RBS and £20bn into Lloyds Banking Group to stop them from collapsing.

However, Osborne would have to defend the sale – possibly of between £2bn and £3bn worth of shares – at a loss to the taxpayer seven years on from the financial crisis.

James Leigh-Pemberton, the boss of UK Financial Investments, which looks after the taxpayer stakes in bailout banks, has told Osborne that at least £2bn of RBS can be sold by April. But in a letter at the time of the July budget he gave no timescale.

The shares ended the week at 341p, valuing the taxpayer stake at just over £30bn, around £15bn less than the average price paid for them.

While 502p is the average price, other sums have also been produced. The shares were bought in three tranches – the first in December 2008 at 655p, the second in April 2009 at 318p and the bulk at 500p in December 2009. That gives 502p although calculations by UKFI push it down to 441p if fees are included.

Osborne has signalled he is keen to start selling off the RBS stake, saying in this year’s Mansion House speech that the loss on the RBS stake would be overridden by profits from the sale of other bailed-out banks, including Lloyds and Northern Rock. The RBS share price has fallen since then on speculation of a share sale.

The publication of the RBS half-year results – showing a loss – was regarded as a possible opportunity to sell shares, as it contained more detailed disclosure than usual about the string of legal problems facing the bank in the coming months.

At the time of the Mansion House speech, Osborne had used a report commissioned from investment bankers at Rothschild to defend the sell-off at a loss. He will now need advice from privatisation advisers Goldman Sachs and UKFI before deciding whether to go ahead.

Big shares sales usually avoid high summer because volumes are thin, with many investors taking their holiday. However, Osborne is reportedly keen to start the sale.

The advisers will need to decide whether there is enough appetite from big City investors to buy shares. The process would most likely be signalled to the market, just as it was for the sell-off of Lloyds shares two years ago. In 2013, an announcement was made at 4.45pm after the stock market had closed to say investors were being canvassed to buy shares. The deal was completed overnight and announced to the market at 7am the following day.

The Lloyds sell-off has led to the government stake falling from 43% to below 15% over two years. Osborne is now facing calls to carry on “dribbling” shares into the market – a new process adopted this year – rather than hold on to shares and sell them to retail investors, most likely next year.

“I do think it would be an awful lot simpler and less costly to sell the remainder of the shares in the market than execute a retail sale at some fixed discount,” Richard Buxton, head of UK equities at Old Mutual Global Investors, told Reuters.

The Lloyds stake has been sold off above the average price paid for it.

The Treasury would not comment, nor would UKFI or Goldman Sachs.



