The government has kicked off the second sale of its stake in Royal Bank of Scotland (RBS), announcing it will begin the process of offloading 7.7 per cent of the bailed-out bank overnight.
UK Government Investments (UKGI), the corporate finance arm of the government responsible for managing its stake in RBS, advised chancellor Philip Hammond today that he should resume selling down the 70.1 per cent stake the government has owned since the height of the financial crisis.
The sale of 925m shares, the price of which will be determined through an accelerated bookbuilding process where shares are offered to institutional investors over a short time period, will reduce the
Taking the close price this afternoon of 280.9p per share, the sale would return around £2.6bn to the government.
“UKGI today advised the chancellor it would be appropriate to conduct the second sale of the government’s shareholding in the Royal Bank of Scotland,” a Treasury spokesperson said.
“The chancellor agreed with that advice and has authorised the process to begin.”
The bookbuild began immediately after the statement, just before 5pm this afternoon.
RBS has been pushing through a number of changes under taxpayers’ ownership. Under the leadership of Ross McEwan and his predecessor Stephen Hester, the bank has begun to unwind former boss Fred Goodwin’s legacy of rapid debt-fuelled expansion.
A settlement with the US Department of Justice and the sale of a chunk of its stake in Saudi Arabian bank Alawwal earlier this year further helped to make the bank attractive to investors.
“The RBS share price has bounced back from its slump after the EU referendum, but the taxpayer’s still going to be significantly out of pocket as the government sells down its stake,” said Laith Khalaf, an analyst at investment platform Hargreaves Lansdown.
“Few argue the RBS bailout was not necessary to maintain financial stability, but the cost of that intervention is now starting to emerge.”
The government paid £45bn to rescue RBS in 2008. In August 2015 the government sold 5.4 per cent of the bank, crystallising a loss of £1.1bn.
Labour attacked the sale, as shadow chancellor John McDonnell has recently called for the government to take greater control of the bank.
But others welcomed the news of the sell-down. “Labour are wrong to oppose plans to sell-off RBS shares,” said Sam Dumitriu of free market think tank the Adam Smith Institute.
“It is a mistake to think that just because they were once twice as valuable that they will be again. The state-owned bank’s share price has fallen by 50 pence since the last sell-off three years ago.”
James Price of tax reform group the Taxpayers’ Alliance added: “The state has no business permanently owning shares in a bank, regardless of the current share price.
“Arguments for keeping these shares in public ownership are wheeled out by advocates of a big state regardless of whether the share price goes up or down. This was never an ‘investment’ but an emergency recapitalisation plan made during the financial crisis.”
He added that the remaining shares should be sold “as quickly as practically possible”.
UKGI and the Treasury have agreed with bookrunners Citigroup, Goldman Sachs, JP Morgan and Morgan Stanley that they will not sell any more shares for another 90 days without the bookrunners’ consent.
