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Royal Bank of Scotland

RBS shares weak as UK government confirms 925mln shares sold at 271p each

UK Government Investments Limited said the shares sold amount to 7.7% of RBS's issued share capital, reducing the government's stake to 62.4% from 70.1%

RBS banknote
The share sale will be conducted on Monday evening via an accelerated bookbuild which will determine the price of the offering

Royal Bank of Scotland Group PLC (LON:RBS) shares dropped on Tuesday following confirmation that the UK government has sold 925mln shares in the state-controlled lender at a price of 271p each, raising around £2.51bn.

In a statement, UK Government Investments Limited (UKGI) - the unit managing the taxpayer’s stake in the FTSE 100-listed bank - said the shares sold amounted to 7.7% of RBS's issued share capital, reducing the government's stake to 62.4% from 70.1%.

READ: RBS considering paying dividends of similar level to Lloyds Banking Group

RBS was rescued by the government in a £45.5bn bailout at the height of the 2008 financial crisis, and the sale sees the taxpayer make another loss on that investment, with RBS shares having almost halved in value since then impacted by hefty restructuring costs and legacy legal issues that have resulted in billions of pounds in fines.

The share sale, which was managed by Morgan Stanley, Citigroup, Goldman Sachs and JPMorgan, was conducted on Monday evening via an accelerated bookbuild, with the stock sold to institutional investors overnight, UKGI said.

It added that UKGI and HM Treasury have undertaken not to sell further shares in the company for a period of 90 calendar days following the completion of the placing.

In late morning trading, RBS shares were down 3.6% to 270.80p, some way below the 502p per share the government paid in 2008, though, in a July 2017 report, including financing the National Audit Office (NAO) put the cost of each share at 625p for the taxpayer to break-even.

In August 2015 the government sold a 5.4% stake in the bank at 330p per share, which the NAO estimated crystallised a loss of £1.1bn for the taxpayer, or £1.9bn if you include the cost of financing.

READ: RBS’s decade of woe, everything investors need to know as UK Govt starts selling down taxpayer stake

Commenting on the news, Laith Khalaf, senior analyst, at Hargreaves Lansdown said: ‘The RBS share price has bounced back from its slump after the EU referendum, but the taxpayer’s still going to be significantly out of pocket as the government sells down its stake. Few argue the RBS bailout was necessary to maintain financial stability, but the cost of that intervention is now starting to emerge.

He added: “RBS has cleared several obstacles which have now unblocked the road to re-privatisation, in particular settling claims for mis-selling mortgage-backed securities in the US. Today’s share sale is good news for private investors in RBS because it is a step towards becoming a normal bank again, though government sales may put downward pressure on the share price in the near term.”

“As a business RBS remains a work in progress, and consequently an investment for recovery investors with a long-term investment horizon,” Khalaf concluded.

 -- Adds new UKGI statement, updates share price --

Quick facts: Royal Bank of Scotland

Price: £2.08

Market: LSE
Market Cap: £25.19 billion
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