UK Financial Investments in £25bn RBS sell-off proposals

UK Financial Investments, the body charged with managing the UK Government’s stake in the bailed-out banks, has revealed plans to raise £25 billion by off-loading three-quarters of the taxpayer’s near-80 per cent stake in Royal Bank of Scotland over the next five years.

In a letter to Chancellor George Osborne, UK Financial Investments chairman, James Leigh-Pemberton, said that at least £2 billion could be generated from the sale of shares in the 2015-16 fiscal year alone.

He added: “I believe that realising a total of at least £25billion from the sale of RBS shares is feasible in the period to May 2020, while delivering value for money for the taxpayer – provided market conditions are supportive.”

Mr Leigh-Pemberton was asked to look into the whether it was feasible to dispose of the stake at that rate by the chancellor, he revealed in the letter published on the Treasury’s website.

The government bailed out RBS during the 200709 financial crisis at a cost of £45.8billion, leaving taxpayers with a majority stake.

When announcing his initial plans for a sale last month, Mr Osborne estimated the government would make a £7.2bn loss from the sale of RBS but cited a report from advisory firm Rothschild which suggested this would be cushioned by profits made from other state-owned assets such as the other bailed-out banking giant Lloyds as well as credit guarantee scheme fees.

He said starting the RBS sell-off was “the right thing to do”.

Plans for an exit come as the government also attempts to reduce its stake in Lloyds Banking Group, which is now down to just under 16 per cent.

The Lloyds holding has reduced from 24.9 per cent since a programme to “drip-feed” the shares into the market was launched at the end of last year, meaning a total return of £12billion for the taxpayer.

But the public purse will have a £7.2billion hole if the government sells all its RBS shares at £3.52 – their price on June 5, when the appointed adviser completed a report on the sale.

Shares in the Edinburgh-based bank closed at 338.3p yesterday, well short of the £5.02 the government paid to bail it out.