Belfast Telegraph

Monday 22 September 2014

RBS predicts mid-2014 privatisation

RBS has reported first quarter pre-tax profits of 826 million pounds

Royal Bank of Scotland has offered Chancellor George Osborne a pre-election boost by predicting that the Government should be able to start selling off its stake within a year.

Sir Philip Hampton, chairman of the 81% state-owned bank, said the institution's recovery would be "substantially complete" by the middle of 2014, paving the way for its return to the private sector.

The comments marked the clearest signal yet of a timetable for the Government's stake sale and came as first quarter figures showed RBS swinging out of the red with pre-tax profits of £826 million - its best performance since the third quarter of 2011.

A mid-2014 plan for privatisation could not be better timed for Mr Osborne, coming ahead of the next general election in 2015 and as pressure mounts for taxpayers to recoup their cash spent on bailing out banks at the height of the financial crisis.

The Treasury remained tight-lipped on any stake sale plans, saying it does not have a timetable for privatisation and would only look at it when it "presents good value for the taxpayer".

But there are fears that bosses at RBS may be overly optimistic, given the underlying performance of the bank and as shares remain well below the break-even point.

The figures released on Friday showed the difficulties still facing RBS as its core operating profit fell to £1.3 billion against £1.6 billion a year earlier after its investment banking division saw earnings more than halve to £294 million from £826 million a year ago.

Pre-tax profit figures were flattered by the absence of a large bill for payment protection insurance (PPI) mis-selling claims, as well as the lack of a hit from accounting charges for changes in the value of its own debt, which combined to send RBS into the red by £1.5 billion in the first quarter of 2012.

Shares fell 6% as the core earnings results missed City expectations.

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: "Quite apart from the operating profit miss, the previous concerns weigh heavily, even though they are being worked through."

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