RBS share sale nets £2.1bn

With the state having bailed out RBS at a cost of 502 pence a share, the taxpayer is taking a sizeable hit on the sale.

Chancellor Osborne started selling Lloyds shares when that bank’s share price reached the government’s break-even level.

UK Financial Investments (UKFI), through which the Treasury owns its stake in RBS, has told the Chancellor it would be “appropriate” to conduct the first sale of the Government’s shareholding. However, the bank has been selling assets and cutting jobs to restore profitability.

The move has reduced the Government’s stake in the group from 78.3% to around 72.9% and the £2.1 billion raised will be used to pay down Britain’s national debt.

Britain also had to rescue Lloyds and has sold down its stake in that bank at a profit over the past two years and now holds less than 14 per cent.

Some analysts believe Mr Osborne’s decision is part of a wider plan aimed at encouraging private investment in the banks following the financial crisis, with the government hoping that the price of shares in the bank will eventually rise. Most shares were snapped up by hedge funds.

“This sale was always going to come at discount and the Government has nearly certainly accepted that it will never get back all the money that was put into RBS”.

This could have created a huge amount of bad feeling among institutional investors and may have jeopardised future sales.

RBS shares fell 1.3 per cent Monday to 337.6p. That crystalised a £1 billion loss on the shares sold. The United Kingdom said Monday it planned to start selling its stake in RBS via an overnight book build. The CEO added that there is more work to be done but the management team continues to build a bank that the country could be proud of.

Separately, The Herald newspaper in Scotland, reported at the weekend an interesting attempt at the High Court in London last week by the lawyers for RBS to have Fred Goodwin, the former RBS chief executive officer, excluded from the legal case with shareholder action groups over the bank’s £12bn rights issue in April 2008.

Roughly 500p. It means the taxpayer lost about 170p per share sold, or more than £1 billion in total.

Last night a Treasury spokesman was claiming the initial sale of five per cent of the Government’s RBS shares would secure the “the best value for the taxpayer”.

But the Government is making a small profit on the sale of its stake in Lloyds, which has recovered faster than its state-backed rival RBS.

Critics of the announcement point out that the price of the shares in the first chunk to be sold, at 330p each, is significantly lower than the figure of about 500p which the Treasury paid for them at the height of the financial crisis.