LONDON: Britain took a £1.1bn loss on its first sale of shares in Royal Bank of Scotland (RBS) yesterday, sparking accusations of poor timing from opposition politicians.
The UK government sold a 5.4 percent stake in RBS at 330 pence per share, a third below the price paid when Britain rescued the bank with £45.8bn of taxpayer cash at the peak of the 2007/09 financial crisis. The move raised £2.1bn and is expected to be followed by several more sales. Overall, the government is sitting on a £15bn loss on its holding, based on the current stock price and its average purchase price of 502 pence.
But the sale was more about starting the process of returning RBS to the private sector and showing investors the government is reducing its interference in the bank, rather than avoiding a loss, people familiar with the decision said. “While the easiest thing to do would be to duck the difficult decisions and leave RBS in state hands, the right thing to do for the economy and for taxpayers is to start selling off our stake,” Chancellor George Osborne said.
But the Labour Party slammed the sale. “RBS had to be bailed out urgently, but it doesn’t have to be sold off at the same speed,” said Chris Leslie, its finance spokesman. “The Chancellor (Osborne) needs to justify his haste in selling off a chunk of RBS while the bank is still awaiting a US settlement for the mis-selling of sub-prime mortgages,” Leslie added, referring to a potentially massive fine from US authorities, related to RBS’s past sales of US mortgages.
RBS has set aside £2.1bn for a settlement but analysts estimate it could cost as much as £9bn, which has weighed on the stock.
The share sale, which cuts taxpayers’ holding to 72.9 percent from 78.3 percent, marks a milestone in Britain’s recovery from the financial crisis, and is part of Osborne’s strategy to improve the country’s finances.
The move had been on the cards since Osborne in June accelerated the timetable for selling RBS, after his Conservative Party won May’s national election.
He has lost no time since then in pressing on with his plans for Britain’s economy, including the sale of more shares in Lloyds Banking Group and a budget that included a shift away from welfare spending to higher wages for workers. Osborne aims to sell at least three quarters of its RBS holding, currently worth about £25bn, in the next five years.
UK Financial Investments, the body that holds the stake, said it sold 630 million shares in a quick-fire sale to institutional investors after the market closed on Monday, slightly more than it had planned to sell. Reuters
