4th Aug 2015 06:24
LONDON (Alliance News) - The UK government has sold a 5.4% stake in Royal Bank of Scotland Group PLC, taking the milestone first step on the way to returning the bank to full private ownership six years after its GBP45.5 billion bailout in the global financial crisis.
HM Treasury, which is the UK's economic and finance ministry, has sold 630 million ordinary shares at 330 pence each, leaving it with an overall 72.9% stake in RBS. It now controls 51.5% of the voting rights in the bank, compared with 61.3% before the sale. It said late on Monday it had expected to sell about 600 million ordinary shares.
Because of the way the bailout was structured, the government came to own both ordinary shares and B shares in RBS. Ordinary shares carry voting rights, whereas B shares do not, hence why the government's overall stake in the bank differs from its percentage of the voting rights.
The shares were sold in an accelerated bookbuild placing, which requires little marketing, with institutional investors.
UK Financial Investments, the body responsible for managing the government's shareholding in bailed out banks, advised Chancellor George Osborne to go ahead with the disposal of RBS shares.
"The government set out its objectives for its shareholdings in the banks in the Chancellor?s annual Mansion House speech in June 2013 ? getting the best value for the taxpayer, maximising support for the economy and restoring them to private ownership ? and as set out in that address, the government will only conclude a sale if these objectives are met," a spokesperson for the Treasury had said on Monday.
The Conservative Chancellor is aiming to sell more than 75% of the taxpayer's stake in RBS by 2020 after receiving advice from UKFI. Such a sale has some catching up to do with the similar process taking place for Lloyds Banking Group PLC. The government had already been able to reduce its stake in Lloyds to 13.99% from the 43% shareholding taken with its GBP20 billion bailout during the crisis, with the disposal supported by the bank's return to making profit and paying dividends.
Osborne's move to sell the shares in RBS at a loss is politically sensitive, given that the government bought the shares at an average price of 502 pence in three tranches between 2008 and 2009. Net of fees and dividends received from RBS for the bailout, UKFI calculated the total investment in the bank at an average 441p per share at the end of March.
RBS shares closed down 1.3% at 337.60 pence on Monday.
"Two years ago George Osborne said he would only countenance a sale of RBS when ?the bank is fully able to support our economy and when we get good value?. Neither of these tests has yet been passed," Labour's Chris Leslie, the shadow Chancellor, said on Monday.
The government will not sell any further shares for 90 calendar days on completion of the placing, and any such placing would require prior written consent of a majority of the bookrunners: Citigroup Global Markets Ltd, Goldman Sachs International, Morgan Stanley & Co. International PLC and UBS Ltd.
N M Rothschild & Sons Ltd is acting as capital markets adviser, and Freshfields Bruckhaus Deringer LLP is acting as legal counsel to UKFI.
RBS is fresh from reporting a GBP293 million net profit in the second quarter of 2015, compared with GBP230 million in the corresponding quarter the prior year.
RBS is now concentrating on lending to customers in the UK and the Republic of Ireland, and in February said it no longer intended to operate a standalone investment bank, a departure from the global ambitions that cost the bank dearly in the crisis.
By Samuel Agini; [email protected] @SamuelAgini
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