Government takes £1.07bn hit as RBS sell-off finally begins

Overnight the government announced that it had sold 5.4 per cent of its near 80 per cent stake in the Edinburgh-based lender at 330p a share, a 7.6p discount on Monday’s closing price.

The move raised £2.1 billion, a third below the price politicians paid when the shares were valued at 500p each amid the financial crisis in 2008-2009.

The 170p difference represents a loss of about £1.07bn on the shares sold.

Despite the hit, Chancellor George Osborne has attempted to justify move, which cuts the taxpayer shareholding from 79 per cent to just below 73 per cent, saying it was the right thing to do for the British taxpayer.

Slightly more shares than expected were sold to hedge funds and major City investors after the stock market closed on Monday, crystallising a loss for the taxpayer after £45bn was ploughed into the bank to rescue it.

The bank’s chief executive Ross McEwan this morning announced his support for the move, saying: “I’m pleased the government has started to sell down its stake. It’s an important moment and reflects the progress we are making to become a stronger, simpler and fairer bank. There is more work to be done but we’re determined to build a bank the country can be proud of.”

Banking analysts, however, received the news with mixed reviews.

Ian Gordon of Investec said the initiative had left the British taxpayer “short-changed” but James Bevan, chief investment officer at money manager CCLA Investment Management, said the loss was “relatively small”.

Those who criticised the move pointed to the fact that the shares could have been sold for a higher price in February, when they were changing hands for more than 400p.

Last week, RBS reported a half-year loss of £153m after setting aside more money for repaying customers and potential legal settlements.

However, for the three months to the end of June, the bank posted a profit of £293m.

Harriett Baldwin, economic secretary to the Treasury, said Mr Osborne was following Bank of England Governor Mark Carneys’ advice that a sale should now commence.

Mr Carney said in June the phased sell-off “would promote financial stability” and benefit the wider economy.

UK Financial Investments, the company through which the Treasury owns shares in banks like RBS, “has taken the view that there is a window of opportunity to start this process,” she told the Today programme.

But Barbara Keeley, the shadow treasury minister, accused the government of “casually” losing £1bn.

“The most important question for the tax-payer - are we getting good value for our money? This used to be something the Chancellor used to care about, he said he would only sell these RBS shares when we get good value - clearly that’s not now.”

Meanwhile, the government also announced that it has sold a further one per cent stake in its other bailed-out concern, Lloyds Banking Group.

The latest sake reduces the taxpayer’s stake in that lender to 13.99 per cent.

In a stock market disclosure, the Treasury said it has now recouped £14 billion from the sell off, all of which has gone towards reducing the national debt.

The price for the share sale, which was conducted on Friday, was not disclosed. During the financial crisis, the Government bought a 41 per cent stake in Lloyds worth around £20.5bn.

Last week the bank reported a 38 per cent rise in first-half profits despite having to set aside a further £1.4bn for payment protection insurance mis-selling.