Royal Bank of Scotland saw its stock market value rise by as much as £900 million after Chancellor George Osborne announced plans to begin selling off the taxpayer’s stake in it.
Shares climbed by about 2 per cent, although some City analysts questioned the timing of the announcement and one expert suggested it was unlikely that taxpayers would ever get all their money back after ploughing nearly £46 billion into saving RBS.
The government owns 80 per cent of the bank after rescuing it from collapse during the financial crisis seven years ago.
Mr Osborne said in his Mansion House speech to the City on Wednesday night that it stands to make a loss of about £7bn if the stake is sold off in one go.
But he cited an analysis by Rothschild finding there would be an overall profit of £14bn if all the government’s remaining shares in all the bailed-out banks were sold.
Labour claimed the Chancellor’s logic was “dubious” and said taxpayers would be suspicious of any “rush to sell”.
There were also question marks over reports which suggested the £14bn profit would be wiped out by the £18bn cost borne by the Treasury to pay interest on the money it borrowed to finance the bailouts.
Michael Hewson, chief market analyst at CMC Markets, said on RBS: “The fact remains it is unlikely that the UK taxpayer will ever get all of its money back and if anyone thinks otherwise, they are inhabiting a different universe to the rest of us. It makes more sense to get the bank back on its feet, off the government’s books and to go back to trading as a going concern free of state support, contributing to the Exchequer over the next 20 to 30 years.”
Investec banking expert Ian Gordon said: “The timing of last night’s announcement was arguably somewhat premature, dictated more by politics rather than, necessarily, an exercise in optimising market timing.”
Graham Spooner, investment research analyst at The Share Centre, said: “The sale is expected to be a difficult one, as the bank is still on the road to recovery and has reported seven years of losses since the bailout.
“We remain cautious on RBS and believe there are better opportunities for followers of the banking sector.”
Mr Osborne said beginning to sell the RBS stake in the coming months was “the right thing to do for British businesses and British taxpayers”.
He added: “Yes, we may get a lower price than Labour paid for it. But the longer we wait, the higher the price the whole economy will pay.”