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RBS: George Osborne begins sale of taxpayer stake in bank RBS: George Osborne begins sale of taxpayer stake in bank
(35 minutes later)
Eight years after the dawn of the global financial crisis the sale of the British state’s 80 per cent stake in the Royal Bank of Scotland has begun, the Treasury have announced.Eight years after the dawn of the global financial crisis the sale of the British state’s 80 per cent stake in the Royal Bank of Scotland has begun, the Treasury have announced.
The Treasury’s decision to offload around 600 million of its RBS shares, representing about 5 per cent of the government’s economic interest in the bank, to institutional investors after markets closed represents a significant moment in the history of the UK financial system.The Treasury’s decision to offload around 600 million of its RBS shares, representing about 5 per cent of the government’s economic interest in the bank, to institutional investors after markets closed represents a significant moment in the history of the UK financial system.
The previous Labour government was forced to pump £45bn of taxpayers’ money into RBS in 2008 and 2009 to prevent the giant lender, run by the disgraced former chief executive Fred Goodwin, from collapsing and creating a wider financial meltdown.The previous Labour government was forced to pump £45bn of taxpayers’ money into RBS in 2008 and 2009 to prevent the giant lender, run by the disgraced former chief executive Fred Goodwin, from collapsing and creating a wider financial meltdown.
But the decision of the Chancellor to begin the sale now is contentious because the RBS share price is still trading 33 per cent below the 502p the previous Labour government paid for the shares.But the decision of the Chancellor to begin the sale now is contentious because the RBS share price is still trading 33 per cent below the 502p the previous Labour government paid for the shares.
Last night RBS’ stock price of the lender was just 337.6p, down 1.34 per cent on the day. That implies that the Government will lose £1bn on the first tranche of its share sale. And if it were to offload all 80 per cent at the current share price the state would book a paper loss of some £15bn.Last night RBS’ stock price of the lender was just 337.6p, down 1.34 per cent on the day. That implies that the Government will lose £1bn on the first tranche of its share sale. And if it were to offload all 80 per cent at the current share price the state would book a paper loss of some £15bn.
“It’s now abundantly clear that the Chancellor can’t meet his promise to get the taxpayer’s money back by privatising RBS” said Christine Berry of the New Economics Foundation. “The only way to make good on our investment is to transform it into a public interest bank focussed on serving the UK economy, not just shareholders”.“It’s now abundantly clear that the Chancellor can’t meet his promise to get the taxpayer’s money back by privatising RBS” said Christine Berry of the New Economics Foundation. “The only way to make good on our investment is to transform it into a public interest bank focussed on serving the UK economy, not just shareholders”.
But a spokesman for the Treasury insisted the sale would secure “the best value for the taxpayer”. But a spokesman for the Treasury insisted the sale would secure “the best value for the taxpayer”. The former RBS chief execiutive Fred Goodwin led the bank into disaster in 2008
The sale was heavily flagged in George Osborne’s Mansion House Speech in June, when the Chancellor brandished a letter from the Governor of the Bank of England, Mark Carney, arguing that the time was right to start selling the shares.The sale was heavily flagged in George Osborne’s Mansion House Speech in June, when the Chancellor brandished a letter from the Governor of the Bank of England, Mark Carney, arguing that the time was right to start selling the shares.
“Yes, we may get a lower price than that was paid for it – but we will get the best price possible. For the longer we wait, the higher the price the whole economy will pay” Mr Osborne said at the time.“Yes, we may get a lower price than that was paid for it – but we will get the best price possible. For the longer we wait, the higher the price the whole economy will pay” Mr Osborne said at the time.
Simon Walker, the Director General of the Institute of Directors, welcomed the RBS sale. “This is another step towards recovering what should be the normal position, where the taxpayer does not own significant numbers of shares in the high street banks” he said.Simon Walker, the Director General of the Institute of Directors, welcomed the RBS sale. “This is another step towards recovering what should be the normal position, where the taxpayer does not own significant numbers of shares in the high street banks” he said.
The government was also forced to rescue Lloyds with £20bn of taxpayers’ money during the financial crisis. But Lloyds’ share price has recovered to the 73.6p that the state paid for its stake and it has been selling that stake down for the past two years at a small profit.The government was also forced to rescue Lloyds with £20bn of taxpayers’ money during the financial crisis. But Lloyds’ share price has recovered to the 73.6p that the state paid for its stake and it has been selling that stake down for the past two years at a small profit.
On 3 August, the Treasury offloaded a further 1 per cent of its Lloyds holding, taking the total recouped to £14bn. The money will be used to reduce the national debt. Lloyds share price on 3 August was 80.07p.On 3 August, the Treasury offloaded a further 1 per cent of its Lloyds holding, taking the total recouped to £14bn. The money will be used to reduce the national debt. Lloyds share price on 3 August was 80.07p.
UKFI, which handles the government’s stakes in banks, named Citigroup, Goldman Sachs, Morgan Stanley and UBS as the bookrunners for the RBS sale.UKFI, which handles the government’s stakes in banks, named Citigroup, Goldman Sachs, Morgan Stanley and UBS as the bookrunners for the RBS sale.
When it almost collapsed in 2008 RBS was one of the biggest banks in the world. It reported catastrophic losses at the height of the financial crisis, many of which were linked to the disastrous 2007 purchase of the Dutch investment bank ABN Amro.When it almost collapsed in 2008 RBS was one of the biggest banks in the world. It reported catastrophic losses at the height of the financial crisis, many of which were linked to the disastrous 2007 purchase of the Dutch investment bank ABN Amro.
Since 2008 RBS has more than halved its assets to £945bn and has reduced its headcount to 109,200 from a peak of 199,800. The bank’s chief executive, Ross McEwan, is slashing the once sprawling investment banking arm and has committed to focusing on UK retail and commercial banking.Since 2008 RBS has more than halved its assets to £945bn and has reduced its headcount to 109,200 from a peak of 199,800. The bank’s chief executive, Ross McEwan, is slashing the once sprawling investment banking arm and has committed to focusing on UK retail and commercial banking.
Some analysts think the share price of RBS, which reported a net profit of £293m for the second quarter of the year last week, is set to rise strongly over the coming months. Joseph Dickerson from the US investment bank Jefferies reckons it will hit 510p next year.Some analysts think the share price of RBS, which reported a net profit of £293m for the second quarter of the year last week, is set to rise strongly over the coming months. Joseph Dickerson from the US investment bank Jefferies reckons it will hit 510p next year.