RBS takes the Direct Line with sale of £630m stake

ROYAL Bank of Scotland has sold a further £630 million of shares in Direct Line Group, the insurance business ordered to be divested by the European Commission in return for the bank’s £45 billion taxpayer bailout.

The sale consisted of 300 million shares, or 18.2 per cent of Direct Line, at 210p each.

RBS is waiting to see if an over-allotment option is exercised. If the option is used then the bank’s remaining stake in RBS will drop to 28.5 per cent – if not then it will sit at 30.3 per cent.

City sources said the over-allotment is designed to give the underwriting banks a safety net, as they can go into the market and buy the extra shares to shore up the price if required.

Bruce Van Saun, RBS group finance director, said: “This successful sale keeps RBS fully on track to meet its obligation to divest its stake in Direct Line by end-2014.”

RBS’s move follows UK Financial Investments (UKFI) selling 6 per cent of Lloyds Banking Group earlier this week, reducing the taxpayers’ holding in the bank from 39 to about 33 per cent.

Sources said RBS may have decided to offer the shares now to anticipate the impending stock market flotation of Royal Mail and a major capital-raising issue by Barclays.

One analyst said: “There are demands on institutions’ cash, and it seems that both RBS and UKFI with Lloyds have decided they do not want to be near the end of the queue for capital.”

RBS has promised not to sell any more of Direct Line for 90 days, subject to certain caveats.