LONDON: The British government has decided to sell 50 per cent of its stake in Royal Bank of Scotland within two years.
Sources said that the UK government may sell its stake worth 16 billion pounds ($25 billion) as first possible sale can be arranged in September.
Finance Minister George Osborne has indicated that he wants to begin reducing the government’s 32 billion pound stake in the coming months, but the sources said the shares will be sold at a faster rate than previously expected, making it likely the government will take a substantial loss on the initial sales.
Final decisions on Britain’s biggest privatisation have yet to be made and progress will depend upon RBS’s performance, market conditions and ongoing investigations into past misconduct, the sources said.
Britain pumped 45.8 billion pounds into RBS to rescue the bank during the 2007/09 financial crisis, leaving the government with a 78 percent stake. At current share prices the government is sitting on a loss of 14 billion pounds.
RBS Chairman Philip Hampton, who is leaving the bank this year, and former CEO Stephen Hester had both said previously that it could take several years for RBS to return to private ownership, given the amount of shares to be sold.
Although Osborne had been reluctant to sell at a loss, the bank’s improving performance and the increased political leeway afforded by the Conservative party’s majority election victory in May have persuaded him now is the time to sell.
The finance ministry declined to comment on whether Osborne will talk about an RBS stake sale when he delivers Britain’s Budget on Wednesday, the first since May’s election victory.
Boosting the chances of a faster than expected RBS privatisation is a British and Irish economic recovery that has enabled the lender to recover debts it had previously written off and to lift operating profit by 16 percent in the first quarter.
