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| Philip Hammond has been preparing for a sale of RBS shares at a loss for months Luke MacGregor/Reuters |
The government is bracing for a loss of
at least £2 billion after pushing ahead with the sale of another slug
of its shares in Royal Bank of Scotland.
The taxpayers’ holding in the bank will fall to 62 per cent from 70 per cent as a result of the divestment of shares to City institutions last night.
They were expected to be sold at a discount to RBS’s closing price yesterday of 281p. That price would represent a £2.2 billion loss on the 502p a share that the government paid in its £45.5 billion bailout of RBS a decade ago to prevent the bank from collapsing. The loss is greater still, at £3.2 billion, when compared with the 625p-a-share cost that the National Audit Office has calculated taxpayers paid to save the bank, taking into account the cost of financing.
The taxpayers’ holding in the bank will fall to 62 per cent from 70 per cent as a result of the divestment of shares to City institutions last night.
They were expected to be sold at a discount to RBS’s closing price yesterday of 281p. That price would represent a £2.2 billion loss on the 502p a share that the government paid in its £45.5 billion bailout of RBS a decade ago to prevent the bank from collapsing. The loss is greater still, at £3.2 billion, when compared with the 625p-a-share cost that the National Audit Office has calculated taxpayers paid to save the bank, taking into account the cost of financing.
The
government intended to sell shares last week, but the plan was delayed
because of market jitters caused by political turmoil in Italy and the
unexpected resignation of Ewen Stevenson, RBS’s finance director.
Philip Hammond has been preparing for a sale of shares at a loss for months. Last year the chancellor said that the government would “return the bank to private hands as soon as we can achieve fair value for the shares, recognising that fair value could well be below what the previous government paid for them”. That meant living in the “real world” about its valuation, he said.
The government’s decision to press the button is set to ignite a fresh political row. John McDonnell, the shadow chancellor, said there was “no economic justification” for a sale. Labour has said that it wants to use RBS as a state bank to lend to businesses, but it is believed to have shelved a manifesto pledge to consider breaking up RBS into more than 100 regional lenders.
In the decade since the financial crisis RBS has closed businesses and made thousands of staff redundant, has complied with several state aid penalties for its bailout and recently reached a resolution over an investigation by US authorities into its sale of mortgage backed-securities.
The disposal of 7.7 per cent of its shares was set to take place overnight in what is known as an accelerated bookbuild, UK Government Investments, which manages the holding, said. The banks handling the process were Morgan Stanley, Citigroup, Goldman Sachs and JP Morgan. They are understood to have filled the order book within half an hour. Final pricing of the deal will become clear today.
James Price, campaign manager at the Taxpayers’ Alliance, said that the government was right to press ahead with the sale. “The state has no business permanently owning shares in a bank, regardless of the share price,” he said.
Sam Dumitriu, of the Adam Smith Institute, said: “Labour are wrong to oppose plans to sell off RBS shares. It is a mistake to think that just because they were once twice as valuable that they will be again. The bank’s share price has fallen by 50p since the last sell-off three years ago.”
Note: If you think this story need more information or correction, feel free to comment below your opinion and reaction.
Philip Hammond has been preparing for a sale of shares at a loss for months. Last year the chancellor said that the government would “return the bank to private hands as soon as we can achieve fair value for the shares, recognising that fair value could well be below what the previous government paid for them”. That meant living in the “real world” about its valuation, he said.
The government’s decision to press the button is set to ignite a fresh political row. John McDonnell, the shadow chancellor, said there was “no economic justification” for a sale. Labour has said that it wants to use RBS as a state bank to lend to businesses, but it is believed to have shelved a manifesto pledge to consider breaking up RBS into more than 100 regional lenders.
In the decade since the financial crisis RBS has closed businesses and made thousands of staff redundant, has complied with several state aid penalties for its bailout and recently reached a resolution over an investigation by US authorities into its sale of mortgage backed-securities.
The disposal of 7.7 per cent of its shares was set to take place overnight in what is known as an accelerated bookbuild, UK Government Investments, which manages the holding, said. The banks handling the process were Morgan Stanley, Citigroup, Goldman Sachs and JP Morgan. They are understood to have filled the order book within half an hour. Final pricing of the deal will become clear today.
James Price, campaign manager at the Taxpayers’ Alliance, said that the government was right to press ahead with the sale. “The state has no business permanently owning shares in a bank, regardless of the share price,” he said.
Sam Dumitriu, of the Adam Smith Institute, said: “Labour are wrong to oppose plans to sell off RBS shares. It is a mistake to think that just because they were once twice as valuable that they will be again. The bank’s share price has fallen by 50p since the last sell-off three years ago.”
Note: If you think this story need more information or correction, feel free to comment below your opinion and reaction.
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