UK government confirms plan to resume RBS reprivatisation

The UK government has announced plans to sell 7.7 per cent of its stake in Royal Bank of Scotland.

The latest sale of 925 million shares, expected to raise £2.6bn, will reduce its holding in RBS from 70.1 per cent to 62.4 per cent.

The bank has been majority owned by the government since it was bailed out at the height of the financial crisis in November 2008 at a cost of £45 billion to the UK taxpayer.

The government owns 8.4 billion shares in RBS, which closed on Monday at 281.1p, valuing the bank at £33.8bn.

It this nearly half what RBS was worth when the Edinburgh-based lender was rescued when the average share price was 502p.

The disposal will take place this week in a process managed by investment banks Morgan Stanley, Citigroup, Goldman Sachs and JPMorgan, according to UK Government Investments, which manages taxpayers’ RBS stake.

The government has said it intends to sell £15bn worth of RBS shares by 2023.

Ross McEwan, RBS CEO said: “I am pleased that the government has decided the time is now right to re-start the share sale process This is an important moment for RBS and an important step in returning the bank to private ownership. It also reflects the progress we have made in building a much simpler, safer bank that is focussed on delivering for its customers and its shareholders.”

Alasdair Ronald, senior investment manager at Brewin Dolphin Glasgow, said: “Royal Bank of Scotland has endured a well-trodden restructuring path but is now returning to normality. The group earned its first profit since the financial crisis, has committed to begin paying dividends again and the final obstacle to the UK Government reducing its 71% stake was the settlement of a fine levied by the US Department of Justice – sufficiently lenient that the group should still earn a profit in the current financial year. Until the Government has sold all its stake, the overhang of shares may well restrain any advance in its price. However, it should be remembered that the bank is now completely different from what it was just over 10 years ago, and the share price won’t return to its pre-financial crisis highs in the foreseeable future.”