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RBS shares sale to await US fine and Williams & Glyn split

Published 16/11/2016

RBS is awaiting on a settlement figure from the US Department of Justice following a probe into the way it sold residential mortgage-backed securities
RBS is awaiting on a settlement figure from the US Department of Justice following a probe into the way it sold residential mortgage-backed securities

The taxpayer's stake in Royal Bank of Scotland (RBS) will not be sold until the lender spins off Williams & Glyn and tackles a hefty fine from US authorities, according to a top Government shareholder.

UK Financial Investments (UKFI), which holds the public's 72% stake in RBS, said investors would be reluctant to snap up the bank's stock at present because there is too much uncertainty over the two issues.

RBS is awaiting on a settlement figure from the US Department of Justice following a probe into the way it sold residential mortgage-backed securities (RMBS) in the lead up to the 2008 financial crisis.

UKFI chairman James Leigh Pemberton said the financial markets are speculating that RBS may be hit with a fine of anywhere between 5 billion US dollars (£4 billion) and 12 billion US dollars (£9.6 billion), but that is not a view held by the organisation.

It comes after RBS said last month it is likely to miss the 2017 deadline to sell off Williams & Glyn, but it is still in discussions with a number of interested parties.

Speaking to the Treasury Select Committee, UKFI chief executive Oliver Holbourn said it is "very difficult" to say when it could start selling shares again in RBS.

"There are really two big issues that investors want more clarity on now before we think they will be willing to buy shares in sufficient size.

"Those two issues are the RMBS litigation in the United States and also the situation with Williams & Glyn.

"As the Chancellor has said on the fringes of the IMF, the sensible thing to do is to wait until those two issues are out of the way."

Defending its decision not to sell the Government's stake in Lloyds Banking Group via a retail offer, Mr Leigh-Pemberton said it was the right decision to take in order to achieve value for money for the taxpayer.

Chancellor Philip Hammond announced in October that heightened volatility in financial markets would see the Government's 9.1% stake in Lloyds sold through a trading plan.

Mr Hammond said the move would allow the Government to recoup the entire £20.3 billion used to bail out the bank during the financial crisis.

"I think the fundamental principle is that if anyone wants to buy Lloyds shares as an individual in really almost any size they can do so today," Mr Leigh-Pemberton added.

"Yes there is cost because you have to have market access through a platform or through a broker, but those costs are quite small.

"I absolutely accept that in so doing you have to pay the market price not a discounted price, but in this current market environment it is our view, and the advice that we gave, that that is the best means of achieving best value for the taxpayer."

Opting for a trading plan means the Government can drip-feed the sale of its stake over a longer period of time.

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