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UK Government to Sell RBS Shares

The Royal Bank of Scotland (RBS) will announce its full-year 2010 results this Thursday, 24th February. It is expected that to coincide with this, Stephen Hester will announce that the British Government may begin to offload its 83% shareholding in the banking group sometime this year.

The results are still expected to show a small loss for the full 2010 year, however it will hide a significant improvement in underlying performance. Indeed, the insurance scheme RBS is getting from the government is expected to wipe out a ~£2billion operating profit, reducing the group to a ~£600million loss. Even so, this is still a huge improvement on the £3.6billion lost in 2009.

UK Financial Investments (UKFI) is the governments holding company for the shares in RBS, Lloyds, etc. and needs to sell its RBS shares at an average over 51pence to achieve a profit for the taxpayer. They may sell a small number at a loss to indicate to investors that they have no intention to keep the bank part-nationalised. It is even possible that this news is deliberately being disseminated so that when it is officially announced the share price will be >51p. The closing price on Friday 18th February was 48.5p, no this news could easily push it over.

If confirmed, this is great news for RBS investors as the stock has mostly traded at a discount to its Net Asset Value due to the threat of political influence on what should be a private business. Already Stephen Hester has indicated that the clamp down on bankers bonuses, the new 50% tax rate, etc. have caused some of their top people to leave and take significant profits with them. Hopefully this week will mark a turning point for the bank and it can once again announce profits and a shrinking shareholding of the UK taxpayer.

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