RBS share sale plan to be announced by government this summer

Wednesday, 22 May 2013 04:10

The chancellor, George Osborne is set to begin the sale of the UK taxpayer’s ££66 billion share in the two bailed-out banks the Royal Bank of Scotland (RBS) and Lloyds Banking Group this summer.

UK taxpayers own 82 per cent of RBS and 40 per cent of Lloyds following bailouts of £46 and £20 billion respectively.

The Prudential Regulatory Authority (PRA), the UK’s new banking regulator has announced that both banks are not required to sell new shares to raise capital.

Mr Osborne said that the government will publish its plan on how to return the two banks to the private sector once the Parliamentary Commission on Banking Standards’ final report is published next month.

He said: “The commission is completing its work and we will then set out the way forward.

“Now is the time for a clear strategy on how to return RBS and Lloyds to the private sector in a way that protects value for the taxpayer."

The PRA described the plans from the two banks as “appropriate” and confirmed that they are happy with the level of security attached to each banks’ balance sheet.

Lloyds is expected to raise £3 billion and RBS £6 billion through the sale of shares but the PRA confirmed that it agreed with the banks that they will be able to meet the demands of the regulator even without selling any new shares.

Both banks are expected to sell assets and restrict both bonus and dividend payments this year in order to meet their targets.

Mr Osborne made his comments alongside the International Monetary Fund (IMF) who stressed that the state should intervene if the banks were unable to raise the required capital by other means.

The IMF called for said any sale should a clear strategy to return the two government-intervened banks to private ownership” and “maximise value for taxpayers and strengthen confidence and competition in the sector.

“If a sovereign backstop is required to meet a capital shortfall, it should be provided,” the IMF said.

A plan is being put together by the Policy Exchange think tank that could see the shares sold even if it was at an initial loss to the taxpayer.

Meanwhile Lloyds said that it will reach its capital requirements without any external help. The bank’s shares have now breached the 61.2p break-even level that the government would need to sell as to recoup the taxpayers’ share.

Last week, David Cameron said that he wanted to see RBS returned to the private sector “as soon as possible.”

RBS chief executive, Stephen Hester said about a possible sale: "The Government could initiate that conversation at any time if they wanted to, and we would certainly be responsive to anything they did."

 

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