Taxpayer takes hit on RBS disposal

THE Treasury has offloaded the first tranche of shares in Royal Bank of Scotland for £2.1 billion, it was confirmed today, but the taxpayer has made a loss of about £1bn on the sale.

The taxpayer has made a loss of about £1bn on the sale of RBS shares. Picture: Phil Wilkinson

UK Financial Investments (UKFI), the body that holds the UK government’s RBS stake, said it had sold 5.4 per cent of RBS at 330p a share – far short of the 502p price paid by the government when it bailed out the bank in 2008 at the height of the financial crisis.

The move has reduced the taxpayer’s stake in the group from 78.3 per cent to some 72.9 per cent.

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Sources said the initial sale of shares was 2.4 times covered by potential institutional investors, with about 40 per cent of those long only funds, according to a Reuters report.

Chancellor George Osborne said the £2.1bn would be used to pay down Britain’s national debt.

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.”

Labour has raised concerns over the government’s rush to offload its stake in RBS when the shares are still languishing below the bailout price paid.

A previous report by investment bank Rothschild said that, if all of the government’s stake was sold at current prices, the taxpayer would lose around £7bn.

However, UKFI estimates that the RBS share price will rise as the firm returns to health and more stock is sold to the market.

Ross McEwan, chief executive of RBS, said today: “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.”

Michael Hewson, analyst at CMC Markets, said: “The bank continues to sell off assets as it continues to cut down its stake in US operation Citizens with another $2bn sale announced last week.

“Litigation costs are likely to continue to be a drag on profitability for some time to come, with US regulators looking into mortgage mis-selling, but the bank continues to restructure its operations with a more domestic focus and it is likely to be more successful in doing that without the UK government peering over its shoulder.

“The start of the disposal process may well have fired the starting gun on the re privatisation process, but the process still has a long way to go before being complete.”