RBS: Osborne To Pull Trigger On £2bn Sale

George Osborne is expected to announce the first sale of taxpayers' shareholding in Royal Bank of Scotland (RBS) on Monday with a £2bn disposal targeted at City investors.

Sky News understands that directors of UK Financial Investments (UKFI), the agency which manages the state's 79% stake in RBS, held talks on Monday to sanction the move.

Insiders said the sale, which will involve disposing of around 5% of RBS to major institutions, was likely to be priced at between 325p and 330p, representing a modest discount to the bank's share price.

Investment bankers from Citi, Goldman Sachs, Morgan Stanley and UBS have been lined up to work on the process, known as an accelerated book-build.

If the share sale proceeds, the results will be announced before the stock market opens on Tuesday morning, although one banker cautioned that a definitive decision had still not been reached.

A disposal of RBS shares will be a symbolically important moment nearly seven years after the bank was rescued with more than £45bn of taxpayers' money.

Labour has warned George Osborne against a summer sale of shares in Royal Bank of Scotland (RBS), arguing that it is not "an impossible objective" to recoup the public's investment if a disposal is delayed.

Speaking to Sky News, Chris Leslie, the shadow chancellor, said the Treasury's "haste" would need to be justified if it began selling the Government's stake ahead of a multibillion pound settlement with US regulators for mis-selling securities before the financial crisis.

There has been mounting speculation about the timing of the Government's first sale of RBS shares since its rescue in the autumn of 2008.

Mr Leslie said he found it difficult to understand the sense of urgency with RBS shares trading so far below the taxpayers' 'in price' of 502p.

"The Chancellor will need to justify his haste if he sells off a chunk of RBS before the US settlement and when the market is less liquid.

"Taxpayers want their money back and I just don't believe this is an impossible objective," he said.

"Why this rush to sell when the share price is so far below that paid at the time of the rescue? RBS had to be bailed out urgently, but it doesn’t have to be sold off at the same speed."

Mr Osborne announced in June that he would begin reducing the Government's 79% stake in the coming months, while his Budget last month pledged to offload at least £2bn of the bank's shares by next April.

The initial sale is likely to comprise around £2bn-worth of shares, equating, roughly, to a 5% stake in RBS.

Last week, RBS unveiled a half-year loss after taking a string of charges for mis-selling and restructuring, and signalled that dividend payments would not restart until 2017 at the earliest.

Mr Osborne is determined to head off criticism about the sale of an initial tranche of RBS shares at a loss.

In a report he commissioned from Rothschild, the investment bank, his advisers concluded that disposing of the taxpayer's entire stake in the bank would crystallise a £7bn loss if fees paid to the Treasury since 2008 were taken into account.

They added, however, that the Government could make an overall profit of £14bn from its bank rescues, which included the emergency bailouts of Bradford & Bingley, Lloyds Banking Group and Northern Rock.

That view was immediately challenged by Andrew Tyrie, the Treasury Select Committee chairman, who argued that the projected surplus did not include the cost of financing the acquisitions.

"The start of a sale programme can send a strong signal that the bank is making strong progress in its restructuring and is well on the way to recovery," Rothschild said in its report recommending that the Chancellor kicks off the sale.

"Any residual impression amongst investors that the bank may not be run for purely commercial purposes is likely to evaporate very quickly".

A senior fund manager at one leading City institution said on Monday that RBS shares were "unattractive" at the current level and that he would not be participating in a Treasury sale.

"We think Ross [McEwan, RBS chief executive] is doing an excellent job, but the shares have already priced in the profit recovery for the next two years, and without a dividend supporting them, it's just not a sensible level to invest at," the source said.

RBS, the Treasury and UKFI all declined to comment.