London: Britain has sold a 2.1 billion pound ($3.3 billion) stake in Royal Bank of Scotland (RBS) to kick off the disposal of its holding seven years after bailing out the bank, sparking a political row that the sale at a loss was being hurried.
Finance Minister George Osborne on Tuesday hailed the start of returning RBS to the private sector and said it was right to commence selling at a loss to the price paid in the 2008 rescue.
"While the easiest thing to do would be to duck the difficult decisions and leave RBS in state hands, the right thing to do for the economy and for taxpayers is to start selling off our stake," Osborne said.
The share sale cuts the taxpayers` holding to 72.9 percent from 78.3 percent and marks a milestone in Britain`s recovery from the 2007/09 financial crisis, at whose peak Britain rescued RBS with 45.8 billion pounds of taxpayer cash.
The divestment had been on the cards since Osborne said in June he was keen to start a selloff, even though the government is selling at a loss given the shares were bought at an average price of 502 pence each.
The opposition Labour Party slammed the sale. "RBS had to be bailed out urgently, but it doesn’t have to be sold off at the same speed," said Chris Leslie, shadow finance minister. "The Chancellor needs to justify his haste in selling off a chunk of RBS while the bank is still awaiting a U.S. settlement for the mis-selling of sub-prime mortgages."
Leslie was referring to a potentially massive fine from U.S. authorities against RBS, related to past sales of U.S. mortgages. RBS has set aside 2.1 billion pounds for a settlement but has said the timing of a deal is uncertain and analysts estimate it could cost as much as 9 billion pounds.
ACCELERATED TIMETABLE
Osborne accelerated the timetable for selling RBS after his Conservative Party won the UK national election in May with a surprise majority, giving his party more power in government.
He has lost no time since then in pressing on with his plans for Britain`s economy, including the sale of more shares in Lloyds Banking Group and a budget that included a shift away from welfare spending to higher wages for workers.
UK Financial Investments (UKFI), the body that holds the government`s stake, said it sold 630 million shares, or 5.4 percent of the bank, at 330p per share in a quick-fire sale to institutional investors after the market closed on Monday.
UKFI sold more shares than it had indicated on Monday, when it had announced plans to sell 600 million. The 2.3 percent discount to RBS`s closing price on Monday, at which the shares were sold, was also narrower than the 3.1 percent discount on the government`s first sale of Lloyds shares in September 2013.
The RBS share sale was 2.4 times covered by investors, a person familiar with the matter said, adding about 48 percent were UK-based investors, 37 percent were from the United States and 15 percent were from elsewhere.
RBS CEO Ross McEwan said he was pleased the sell-down had begun, which he said reflected the progress the bank had made "to become a stronger, simpler and fairer bank".
RBS was briefly the world`s biggest bank by assets, but it has more than halved its assets and the size of its investment bank and sold businesses in the United States and around the world.
Britain also had to rescue Lloyds and has sold down its stake in that bank at a profit over the past two years and now holds less than 14 percent. The taxpayer could make at least 2 billion pounds on the Lloyds bailout.
The RBS sale was handled by Citigroup , Goldman Sachs , Morgan Stanley and UBS .
