RBS shareholders approve buy back of £1.5bn in Government shares

Royal Bank of Scotland shareholders have approved a proposal that would see the lender buy back up to £1.5 billion of shares from the UK Government.

The move comes as the banking institution looks to deploy excess capital and speed up its privatisation

A total of 98.7 per cent of investors approved the plan today at a general meeting in Edinburgh.

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The Royal Bank of Scotland branch on Princes Street in Edinburgh. Picture: Jane Barlow/PA WireThe Royal Bank of Scotland branch on Princes Street in Edinburgh. Picture: Jane Barlow/PA Wire
The Royal Bank of Scotland branch on Princes Street in Edinburgh. Picture: Jane Barlow/PA Wire
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The Government, which still owns 62 per cent of RBS, did not vote on the resolution.

The lender’s special resolution sought permission to make off-market share purchases from the Treasury through a “directed buy-back” scheme.

Under the scheme, the bank cannot buy back more than 4.99 per cent of the Government’s stake in any one year.

One shareholder at the meeting described the plan as “abhorrent”, arguing RBS should be holding back the cash to pay compensation for potentially huge legal settlements.

He also accused the bank of “running scared” from a potential general election and resultant Labour government, which would seek to nationalise the bank.

But chairman Howard Davies said: “This is something that the board has carefully considered. The bank has a sufficiently strong capital position. They [Labour] will have to speak for themselves.”

RBS has been majority taxpayer owned since 2008, when it received a £45 billion bailout at the height of the financial crisis.

The Treasury plans to sell its stake by 2024, but is expected to lose billions in the process.

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RBS was bailed out at 502 pence per share in 2008, but its stock is trading at around 249p today.

The shares bought from the Government are expected to be cancelled, which would increase the value of the bank’s outstanding shares.

RBS has been exploring a share buy-back programme since last year when it declared its first dividend in a decade in order to bring the public holding to less than 50 per cent by the end of the current Parliament.

In the Autumn Budget, Chancellor Philip Hammond said the Government intended to exit its ownership of the bank by 2024.

RBS said the buy-back could take place as part of a placement by the Treasury at a price determined through an open-market book-building process.

It could also happen via a bilateral deal whereby the bank buys a certain number of shares at the relevant market price agreed with Treasury, independent of any larger placement of shares by the Government.

The final method under consideration would be a trading programme in which a broker is nominated to oversee the daily purchase of a certain percentage of shares at the market price.

Following shareholder approval for the share buy-back programme, a Treasury spokesman said: “The Government should not be in the business of owning banks, which is why we’re committed to returning RBS back to private ownership.

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“But we will only sell RBS shares when it represents value for money to do so. Today’s vote does not commit us to sell shares in any one way and we keep all options open.”

RBS is due to publish full-year results on 15 February.