The City welcomed the start of the sell-off of the taxpayers’ 80% stake in Royal Bank of Scotland within the next few months which was announced by Chancellor George Osborne in his Mansion House speech last night.
Shares in the bank, which was bailed out for £45 billion seven years ago, jumped more than 2% at the opening of stock-market trading before settling up 5p at 359.8 — a gain of 1.4%.
The bailout cost an average 455p a share, and Osborne said that meant the taxpayers’ loss on the stake is currently £7 billion.
Bankers said that while selling initial tranches of RBS shares to institutions could start in a matter of months it could take anything from five to seven years to dispose of the entire 80% stake.
Gerard Lyons, economic adviser to the Mayor of London and a former banker at Standard Chartered, said: “When you have a government with an 80% stake in a key bank you know that cannot go on forever.
“It makes sense to start the sales process, but this is not so much about the price as about starting to normalise the banking system and the financial system.”
Ian Gordon, banking analyst at Investec, said: “We think that the timing of last night’s announcement was arguably somewhat premature, dictated more by politics rather than, necessarily, an exercise in optimising market timing. That said, we continue to believe that the RBS share price will see support.”
Joe Dickerson at Jefferies was even more positive: “I would say demand is high from large institutions in the US, the UK and Europe. It’s a very attractive risk/reward payoff with potential excess capital down the road.”
Out of 27 analysts who cover RBS, only five currently rate the shares as a buy, seven are neutral and 15 advise being underweight or selling them. Their target price for the shares ranges from just 250p to 510p.
