British Chancellor of the Exchequer George Osborne said he would start returning Royal Bank of Scotland Group PLC (RBS) to private ownership in the coming months, even though it may cause a loss for UK taxpayers.
Shares will be sold to institutional investors first, Osborne announced in a speech at the annual Mansion House dinner in London’s financial district on Wednesday.
Disposing of RBS in its entirety “will take some years,” he said, though there is “no reason” why a retail offering cannot be held at a later date.
The UK Treasury published a report by Rothschild advising it to begin selling the shares to gain maximum value.
Osborne’s strengthened hand as chancellor in a majority Conservative government following last month’s election allows him to commit to selling the UK’s 79 percent stake in RBS earlier than anticipated. While the government will be selling some RBS shares at a loss, it has been able to recoup money by disposing of parts of its stake in Lloyds Banking Group PLC. The decision to proceed with the RBS sale was supported by Bank of England Governor Mark Carney.
“It’s the right thing to do for British businesses and British taxpayers,” Osborne said.
“Yes, we may get a lower price than Labour paid for it,” he said, referring to the ￡45.5 billion [US$70 billion] bailout of RBS by [former British prime minister] Gordon Brown’s government in 2008 and 2009. “But the longer we wait, the higher the price the whole economy will pay.”
The Rothschild report showed that if the government sold all its remaining shares in the banks it helped bail out — including Lloyds and RBS — at share prices on Friday last week, taxpayers would recoup ￡14 billion more than the bailouts cost. That includes fees and other proceeds paid by the banks.
Selling the entire government stake in RBS at the current share price would lose about ￡7 billion. However, a sale now would pave the way for later disposals at higher prices, offsetting the potential loss.
RBS welcomed Osborne’s announcement.
“We are pushing ahead with our strategy to build a simpler, stronger, fairer bank that is totally focused on the needs of its customers and centered here in the UK,” CEO Ross McEwan said in a statement “When the government starts selling its shareholding, it will be selling a bank determined to be the best in the country.”
Rothschild advised the Treasury not to wait for RBS to settle claims of misconduct in its handling of US mortgage securities, because the bank’s share price already reflects the impact any settlement may have.
Any fine “is likely to be substantial,” McEwan said during a telephone call with analysts in discussing the bank’s first-quarter earnings on April 30.
A deal could come this year, but “may spill into 2016,” he said.
RBS could pay as much as US$4.5 billion to resolve the claims brought in a lawsuit by the US Federal Housing Finance Agency, Bloomberg Intelligence analyst Elliott Stein wrote on May 27.
“It is not clear that there is much value to the government in waiting until the outcome of the case is known,” Rothschild wrote in its analysis presented to the Treasury.
POOR INTERNAL CONTROLS: Insurance Bureau Director-General Shih Chiung-hwa said the company is expected to get back on track while its chairman is suspended The Financial Supervisory Commission (FSC) yesterday fined Shin Kong Life Insurance Co (新光人壽) NT$27.6 million (US$939,415) for a reckless investment that endangered its solvency, and suspended its chairman Eugene Wu (吳東進) for poor supervision. The penalty is the second-highest in a single case after Nan Shan Life Insurance Co (南山人壽) was fined NT$30 million in September last year and its chairman Du Ying-tzyong (杜英宗) suspended for two years, the commission said. In three rounds of special and regular examinations conducted since last year, the commission found that Shin Kong Life had given too much power to an asset and liability management committee
HEAVY INVESTMENT: Moody’s affirmed the firm’s ‘Aa3’ rating with a ‘stable’ outlook due to its leading position in the industry and ability to match customer requirements Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) revenue this year is expected to increase about 21 percent to NT$1.29 trillion (US$44.01 billion) from NT$1.07 trillion last year, driven by strong demand for advanced 5-nanometer and 7-nanometer chips mainly used in smartphones and high-performance computing devices, a Moody’s Investors Service report on Wednesday said. TSMC’s rate of revenue growth next year is to increase to 7.5 percent, the ratings agency said. The company, which supplies 5-nanometer chips for Apple Inc’s new iPad series, has introduced the advanced chips ahead of its competitors and gained a significant share of the market for the foundry industry’s
Sony Corp has cut its estimated Play Station 5 (PS5) production for this fiscal year by 4 million units, down to about 11 million, following production issues with its custom-designed system-on-chip (SOC) for the new console, people familiar with the matter said. The Tokyo-based electronics giant in July boosted orders with suppliers in anticipation of heightened demand for gaming in the holiday season and beyond, as people spend more time at home due to the COVID-19 pandemic. However, the company has come up against manufacturing issues, such as production yields as low as 50 percent for its SOC, which have cut into
O2O BICYCLE SHOW: The Taiwan Bicycle Show next year is to be online to offline, with forums, audio-visual conferences and livestreaming of the offline events Local bicycle makers expect demand to continue outpacing supply due to orders triggered by the COVID-19 pandemic, with some companies seeing orders back up through next year. “Next year is all full in terms of orders. Our lead time on components is one year,” Giant Manufacturing Co Ltd (巨大機械) chairwoman Bonnie Tu (杜綉珍) told a news conference in Taipei organized by the Taiwan External Trade Development Council (TAITRA) to announce next year’s Taipei Cycle Show. The pandemic has reduced bicycle supplies and increased demand around the world, Robert Wu (吳盈進), chairman of KMC (Kuei Meng) International Inc (桂盟國際), one of the world’s