Britain takes $2.68 billion loss on RBS share sale

Business Tuesday 05/June/2018 13:40 PM
By: Times News Service
Britain takes $2.68 billion loss on RBS share sale

London: Britain has sold some of its holding in Royal Bank of Scotland, the bank which it rescued in the 2008 financial crisis, but has taken a loss of more than £2 billion ($2.68 billion) on the deal.
UK Government Investments sold a 7.7 per cent stake in a placement overnight to institutional investors at 271 pence a share, almost half of what the government paid during its initial and largest capital injection into RBS, which it bailed out for a total of £45.5 billion.
"This sale represents a significant step in returning RBS to full private ownership and putting the financial crisis behind us," Britain's Finance Minister Philip Hammond said.
Once one of the largest banks in the world by assets, RBS's near collapse required Britain's biggest bailout, leaving the government still holding a large stake nearly a decade later. After the latest sale its holding is 62.4 per cent.
Britain's opposition Labour party criticised the share sale when it was announced late on Monday, saying that taxpayers would lose out and the government should have held out for more.
The bank's shares were down 3.4 per cent at 0719 GMT.
Jefferies analyst Joseph Dickerson said the sale marked a step towards longer-term investment value in RBS, which has not paid a dividend for a decade.
RBS Chief Executive Ross McEwan said the government's decision reflected the progress RBS had made in becoming simpler and safer.
"This is an important moment for RBS," McEwan, who has presided over the bank's turnaround since 2013 and a series of key milestones in recent months, said in a statement.
Under former Chief Executive Fred Goodwin, RBS expanded rapidly from a small Scottish bank to become a global financial services group.
But a disastrous 2007 bid for Dutch bank ABN Amro was sealed just as the financial crisis hit, bringing the bank to the brink of collapse and forcing the government to step in.
Few argue that Britain's Labour government of the time erred in rescuing the lender, but the years since have been marked by relentless restructuring and billions of dollars in fines to settle misconduct disputes which have hit the bank's recovery efforts and the chances of returning taxpayers' money.
A 2015 Rothschild report commissioned by former finance minister George Osborne found that £107.6 billion in crisis-era bailouts, including funds injected into Lloyds Banking Group and failed lender Northern Rock, would bring a £14.3 billion return for the taxpayer.
But the report estimated a £7.2 billion overall loss on the government's investment into RBS.
Successive governments have also faced criticism for a hands-off approach to RBS which has been embroiled in a series of scandals, including over its treatment of small businesses in the aftermath of the crisis.
The government is set to sell the rest of its 62 per cent stake in RBS over the next few years, most likely in a similar fashion to Monday's sale although it could offer some of the shares to the public.
Monday's sale resumes a process the government began in 2015 when it sold a first tranche of RBS shares - 5.4 per cent of its stake - for 330 pence per share, at a £1.1 billion loss.
Subsequent sales were put on hold pending the agreement of the multi-billion dollar settlement with the US Department of Justice.