THE UK government will be able to start selling off its stake in Royal Bank of Scotland within a year, the bank’s chairman has claimed.
Sir Philip Hampton said the institution, which is 81 per cent owned by the taxpayer, would be in a condition for sale by the middle of next year – by which time its recovery would be “substantially complete”.
The news came as RBS reported a return to profit, posting pre-tax profits of £826 million – its best performance since the third quarter of 2011.
Sir Philip described the results as “our best quarterly performance for some time now”, and said the figures opened the door for a return to the private sector.
“Our balance sheet is substantially fixed… our operating profitability has come through quite strongly,” he said, adding that once the bank’s recovery was stable, it would start preparing a prospectus with the Treasury to sell to investors.
“What we want to do is have a business that is performing well, enabling the government to start selling shares from, let’s say, the middle of 2014 on – it could be earlier, that’s a matter for the government – but certainly we think the recovery process will be substantially complete in about a year or so’s time.”
Chief executive Stephen Hester said yesterday that he had not held any explicit talks with the government about the possibility of selling the bank, but reiterated Sir Philip’s claims, saying that RBS would be looking “much more like a normal bank” next year, when the “clean-up will be substantially complete”.
He added: “A privatisation would be a terrific thing for the country psychologically and taxpayer money would be freed up for other uses.”
Mr Hester said he was “open” to suggestions such as splitting the bank to remove bad assets.
“I think the critique would be the use of taxpayer money in large amounts and the time it would take,” he said.
He said that, while the process of selling down the stake could take a number of years, he was hopeful that taxpayers would eventually make money on their shares.
It is unclear at what price the government would be prepared to sell its stake in RBS back to private investors. SNP and Labour politicians earlier this week warned that the taxpayer should not lose out when RBS – and Bank of Scotland owner Lloyds Banking Group, which is 39 per cent state owned – are sold.
SNP Treasury spokesperson Stewart Hosie MP told The Scotsman yesterday: “Any decision to sell shares must be based on protecting the taxpayer and supporting the economy and not on politics.”
He also warned that then-chancellor Alistair Darling may have overpaid for the banks in the first place. The government bought shares as part of its bailout at 502p, but they are valued at 407p on the government’s
Mr Hester allowed for the possibility that the government might consider selling shares at a loss initially, but said the average sale price “can and should be” above the government’s purchase price.
However, analysts were yesterday sceptical over the likelihood of an early sale.
Market commentator David Buik said: “The likelihood of RBS or Lloyds being privatised before 2015 is probably negligible. Any sale below the break-even price is unlikely to be countenanced, but it is very much the government’s decision.”
Meanwhile, RBS says it is continuing to work on a stock market flotation for the 315 branches it must sell to appease European rules on state aid, with plans to create a separate bank under the Williams & Glyn’s brand.
The group is also “exploring other alternatives” after its deal to sell the branches to Santander collapsed last year.