Election win clears way for quick exit from Royal Bank of Scotland — and cut-price retail offer of shares in Lloyds
The Sunday Times
Aimee Donnellan Published: 10 May 2015
GEORGE OSBORNE is set to fast-track a £35bn sale of the government’s stakes in Royal Bank of Scotland and Lloyds after the Conservatives’ election victory.
Treasury officials are examining plans for an early disposal — at a loss to the taxpayer — of RBS shares, and a £4bn “Tell Sid-style” offer of part of the Lloyds’ holding, with a discount price for the public.
The chancellor has previously said he wants to get rid of the state holding in RBS “as quickly as he can”, which one senior banking source said would mean this year.
“When I say ‘get rid of it’, I mean put it into the good hands of the private sector,” Osborne said.
The sale of the government stakes would mark a decisive break with the past and bring an end to the era of taxpayer-backed banks.
The government ploughed billions of pounds into RBS and Lloyds to save them from collapse in 2008. It injected £45.8bn into RBS to buy shares, and provided hundreds of billions in emergency loans to keep the bank afloat.
Since then, the Treasury has considered offloading a portion of its stake on several occasions, but has balked at selling at a loss.
To break even, the Treasury would need to sell its shares at 502p. RBS shares closed last week at 352.4p, leaving the taxpayer sitting on a loss of £13.8bn. The government can, however, say it has defrayed the loss through the hundreds of millions of pounds in fees it has received from the bank while it was in state ownership.
Lloyds needed a £20bn bailout after its ill-fated takeover of HBOS. Osborne has been steadily selling the government’s stake, but has admitted he regretted not reshaping RBS more quickly. Both banks’ shares bounced by about 6% on Friday after the Tory victory.
Sources within RBS admit the “mood music” from the Treasury has changed in recent months and officials are warming to the idea of allowing a partial stake to be sold at a loss.
Analysts say that while RBS’s finances are improving, it will be difficult to see the share price reaching the break-even point in the near future. “They will have to take a loss,” said one.
Hedge funds and sovereign wealth funds are tipped to be the first buyers of RBS shares, according to a well-placed banking source. “They’re the only ones that are going to catch that falling knife,” he said.
Lloyds shares are likely to be offered to the public at a discount of about 5% on the current trading price. They closed at 87.76p on Friday, comfortably above the government’s 73.6p break-even price. The state’s share in Lloyds has dipped to just over 20% from 43%.