RBS share sale imminent

A multibillion pound sell-off of Royal Bank of Scotland shares by the UK Government is now imminent, despite them being worth little more than half of what they were when the Edinburgh-based lender was bailed out at a cost of £45.5 billion to the taxpayer in 2008.

Shares in the bank closed at 289.7p on Friday, giving RBS a market capitalisation of £34.8bn and making the taxpayer’s stake worth just under £24.5bn.

When RBS was rescued from collapse at the height of the financial crisis the average share price was 502p.

Now City sources are saying that Westminster could be ready to offload as much as 10 per cent of its 71 per cent stake as soon as next week in the wake of the longawaited $4.9bn (£3.6bn) settlement with the US Department of Justice this month as a result of the mis-selling of mortgage bonds before the financial crisis.

The lower-than-expected DOJ fine, coupled with RBS’s recent results showing its first annual profit for a decade has prompted UK Government Investments (UKGI) which manages the government’s stake in RBS, to say it was “an entirely fair assumption” that it would be able to sell a £3bn stake in RBS during this financial year - with projections for a further £12bn of disposals during the next four fiscal years.

If this week’s reports are correct, a sell-off of 10 per cent of the government shares would raise £8 billion for the Treasury.

The bank is due to hold its annual general meeting tomorrow and it is unclear whether a sale would take place prior to that or shortly after it but any sale would require the approval of Chancellor Philip Hammond and would follow advice from UKGI.

The UK Government already offloaded a 5.4 per cent stake in RBS in August 2015.

This was done at a price of 330p per share, considerably more than current prices.

The speculation will also have been further fuelled by news that RBS has been ordered to delay naming its new strategy chief after a warning from the Treasury that it is risking a conflict of interest row.

According to Sky News, the lender has been told to wait until after this week’s AGM before publicly confirming that Oliver Holbourn is joining RBS.

Mr Holbourn recently stepped down as chief executive of UKFI, where he spent several years managing the Government’s stake in the bank.

As the steward of taxpayers’ 71 per cent shareholding in RBS, UKFI has the decisive vote on key resolutions at the meeting, including its remuneration report.

In his new post, Mr Holbourn will play an important role in making RBS a more attractive investment proposition for institutional shareholders - a task made significantly easier by the bank’s £3.6bn settlement with the US Department of Justice for mis-selling mortgage-backed securities.

Mr Holbourn stepped down from UKFI as it was being subsumed into another Treasury unit, UK Government Investments (UKGI), which oversees publicly owned assets such as the student loan book and a stake in National Air Traffic Services.

He joined UKFI in 2013 as its head of capital markets, placing him in charge of designing a strategy for offloading the taxpayer’s vast stakes in RBS and Lloyds Banking Group.