By Max Colchester and Ian Walker
LONDON--The U.K. government on Tuesday said it had sold a 5.4%
stake in Royal Bank of Scotland Group PLC, raising GBP2.08 billion
($3.24 billion) and kicking off a long-awaited privatization of the
lender.
UK Financial Investments Ltd., the body that manages the
government's bank shareholdings, said it had sold the shares at 330
pence each, representing a 2.25% discount to the bank's closing
share price on Monday.
The issue was 2.4 times oversubscribed, with the majority of
buyers being short-term investors, according to a person familiar
with the matter. The U.K. said Monday it planned to start selling
its stake in RBS via an overnight book build.
Shares in RBS fell 1.7% in early trading in London.
Following the sale, the U.K. Treasury's economic interest in
RBS, which includes its holding of ordinary shares and B shares in
the company, will be reduced to 72.9%. It has agreed not to sell
any more shares for 90 days.
RBS Chief Executive Ross McEwan welcomed the sale of the shares,
which the government acquired when it bailed out the bank in
2008.
"It's an important moment and reflects the progress we are
making to become a stronger, simpler and fairer bank. There is more
work to be done but we're determined to build a bank the country
can be proud of," Mr. McEwan said.
The U.K. government pumped in GBP45.5 billion to rescue RBS
during the financial crisis at an average price of GBP5 a share,
meaning the British taxpayer will lose money from the share
sale.
U.K. Chancellor George Osborne said the sale was the right thing
to do for the British economy.
"I wasn't the Chancellor who bailed out RBS; but I am the
Chancellor now responsible for doing the right thing for the
British economy," Mr. Osborne said. "So while the easiest thing to
do would be to duck the difficult decisions and leave RBS in state
hands; the right thing to do for the economy and for taxpayers is
to start selling off our stake."
Following the 2008 bailout government officials hoped RBS's vast
international and investment banking operations would help generate
enough profit to put the bank on its feet. However by 2013 the
losses were still mounting and it became clear the government's
hands-off strategy had failed. The U.K. government became more
proactive, ousting RBS's chief executive, forcing the bank to chop
down its investment bank and divest its U.S. operations.
U.K. officials gave up on the idea that the bank's shares would
soon rise above the original bailout price.
Earlier this year the Treasury was advised by UKFI that it would
be feasible to sell GBP25 billion of RBS shares by 2020,
effectively firing the starting gun on the sale.
It is unclear what returns U.K. taxpayers will make on the money
locked up in RBS. The bank is currently going through a vast
restructuring, which isn't set to be completed before 2019. Last
week RBS warned that it wouldn't be paying dividends until at least
the start of 2017 as it looks to hurdle balance sheet stress tests
and settle many litigation issues.
Write to Max Colchester at max.colchester@wsj.com and Ian Walker
at ian.walker@wsj.com
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