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Government to sell 7.7% RBS stake
The UK government confirmed that it has begun the process to sell a near-£2.6bn chunk of its stake in Royal Bank of Scotland.
The government's shareholding will be reduced from 70.1% to 62.4%, UK Government Investments Limited said on Monday.
A placing of roughly 925m or 7.7% of RBS shares will be made to institutional investors, by way of an accelerated bookbuilding process run by Citigroup, Goldman Sachs, JP Morgan Cazenove and Morgan Stanley that was set to begin immediately and be settled on 7 June.
UKGI and the Treasury, which will confirm the placing price after completion, have pledged not to sell further RBS shares for 90 calendar days following completion of the placing.
In August 2015 the government sold a 5.4% stake at 330p, which the National Audit Office estimated crystallised a loss of £1.1bn for the Treasury, or £1.9bn if you include the cost of financing.
At just over 281p, with a 12-month high of 304p in January, RBS shares are in a better place than the sub-200p lows from after the EU referendum but some distance from the government's 502p a share buy-in price when it bailed out the bank in the middle of the financial crisis.
Last month a worrying weight was lifted from the bank's shoulders as it agreed to pay $4.9bn (£3.6bn) to settle a long running-investigation by the US Department of Justice into the bank's dealing in mortgage-backed securities before the financial crisis.
RBS said $3.46bn of the penalty would be covered by existing provisions and that it would take a further $1.44bn charge in the second quarter.
Analyst Laith Khalaf at Hargreaves Lansdown said: "Few argue the RBS bailout was necessary to maintain financial stability, but the cost of that intervention is now starting to emerge."
He added: "RBS has cleared several obstacles which have now unblocked the road to re-privatisation, in particular settling claims for mis-selling mortgage-backed securities in the US. Today's share sale is good news for private investors in RBS because it is a step towards becoming a normal bank again, though government sales may put downward pressure on the share price in the near term. As a business RBS remains a work in progress, and consequently an investment for recovery investors with a long term investment horizon."