Britain’s government has begun selling its majority stake in bailed-out Royal Bank of Scotland (RBS) Group PLC to reduce state debt and kick-start the lender’s full return to the private sector, the Treasury said yesterday.
The government has sold 5.4 percent of RBS for ￡2.1 billion (US$3.3 billion), a statement said. Royal Bank of Scotland was rescued with ￡45.5 billion of public money in 2008 at the height of the global financial crisis.
The world’s biggest bank bailout handed Britain’s government with about 80 percent of the Edinburgh-based lender.
RBS has since reported losses totaling about ￡50 billion and has axed more than 30,000 jobs, with thousands more reportedly set to follow.
TREASURY STATEMENT
“The government has today begun the process of selling its shares in the Royal Bank of Scotland. It has sold 5.4 percent of the bank at a price of 330p [pence] per share,” the Treasury said yesterday. “The 2.1 billion pounds raised from the sale will be used to pay down the national debt.”
With the state having bailed out RBS at a cost of 502 pence a share, the taxpayer is taking a sizeable hit on the sale. However, analysts suggest that selling a small piece of the government holding now will make it easier and more profitable to sell the rest in the future.
British Chancellor of the Exchequer George Osborne insisted that the move was “an important first step in returning the bank to private ownership, which is the right thing to do for the taxpayer and for British businesses.”
FINANCIAL STABILITY
Osborne said that the move would “promote financial stability, lead to a more competitive banking sector, and support the interests of the wider economy.”
“It’s an important moment and reflects the progress we are making to become a stronger, simpler and fairer bank,” bank chief executive officer Ross McEwan said. “There is more work to be done, but we’re determined to build a bank the country can be proud of.”
The proceeds will be used to pay down the national debt.
The Royal Bank of Scotland in February said that it would end its investment banking operations in the Middle East and Africa and significantly reduce its presence in Asia and the US after posting a seventh straight annual loss last year.
However, it recorded a 27 percent rise in net profits for the second quarter of this year, with the sale of US operations offsetting higher exceptional costs.
Additional reporting by AP
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