Profit on RBS stake sale will be tricky, warns outgoing Treasury chief

RBS building

Fresh doubt has been cast on the ability of George Osborne to sell off the state’s remaining stake in Royal Bank of Scotland at a profit following remarks by the outgoing head of the Treasury.

The chancellor sold off the first tranche of a 79% stake in the bailed-out bank in August at a £1bn loss and Sir Nicholas Macpherson, the outgoing permanent secretary, has admitted the rest may have to be sold below the break-even price.

Asked whether there was a case for selling off the rest of the shares below the crucial 502p average at which the 79% stake was bought in 2008 and 2009, Macpherson told the Financial Times (£): “I think that is the judgment which will have to be made.”

The chancellor’s hopes of receiving almost £30bn from the sale of the shares by the end of this parliament in 2020 were called into question earlier this year by the Office for Budget Responsibility (OBR), with data appearing to show a £23bn loss at current share prices.

The fall in the RBS share price between the March 2015 budget and last November’s autumn statement mean the OBR reduced the value of the RBS stake from £34bn to £25bn.

The first 5 percentage point stake was sold in August, cutting the taxpayer stake to 73%. At the time the shares were sold at 330p. They now trade at 224p.

The Treasury said the government remained absolutely determined to return RBS to the private sector.

“Last year, the chancellor received independent advice from the [Bank of England] governor stating that it was in the public interest for the government to begin the return of RBS to private ownership in the near-term,” it added.

“With that in mind, the government conducted an initial sale of shares in RBS in August 2015, raising £2.1bn for the taxpayer. This was the first step in the government’s plan to maximise value for taxpayers, and based on the independent OBR’s calculations, we can comfortably expect to receive more money back from the interventions in the banks than was put in.

“This is a considerably better result for taxpayers than was considered likely in 2009 when HM Treasury estimated that the cost to the taxpayer would be in the order of £20-50bn. The government will conduct further sales subject to market conditions.”

Osborne has already been forced to delay the sale of the government’s remaining stake in Lloyds Banking Group, announcing earlier this year that a public share offering would be delayed because of market conditions.

Osborne cut the Lloyds stake from 73% to around 9% through a series of sales to leading City investors and had pledged to keep some back for a discounted offer to private investors. But its shares are now trading below the 73.6p break-even price at 69p.

Macpherson said it was “going to be tricky” to sell off the rest of the RBS stake before the next parliament.

But he told the FT it would boost lending. “My experience of running banks is that the longer they stay in the public sector the greater the likelihood that you will lose value,” said Macpherson.

Powered by Guardian.co.ukThis article was written by Jill Treanor, for theguardian.com on Thursday 14th April 2016 08.22 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010

 

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