Investors want RBS DoJ fine settled before backing privatisation
Taxpayers own 72% of RBS following a £45.5 billion Government bailout.
The path towards privatising Royal Bank of Scotland will be made clearer once a multibillion-pound US mis-selling fine is announced, the man overseeing the process has said, but choppy markets could still derail any sale of the taxpayer’s stake.
James Leigh-Pemberton, the head of UK Financial Investments (UKFI), said that while settling the fine is not a road block to kick-starting the process, investors would prefer it to be out of the way.
“It would be very helpful to have out of the way to enable a future sale, but it’s not the necessary condition for future sales.
“In the current environment, there are investors who I think would like to see that matter resolved before committing themselves to RBS equity.”
The fine, which the US Department of Justice is expected to issue imminently, relates to the mis-selling of retail mortgage-backed securities (RMBS).
Once a settlement is reached, it would allow RBS to kick-start the process of resuming dividends, thereby attracting funds who only invest in such stocks.
Taxpayers own 72% of RBS following a £45.5 billion Government bailout at the height of the financial crisis.
The Government said last year that plans to re-privatise the taxpayer-backed lender were under way, with the aim of selling £15 billion of its shares by 2023.
It wants to restart share sales in RBS by the end of the 2018-19 financial year and sell off £3 billion a year over five years – around two-thirds of its stake.
However, Mr Leigh-Pemberton, who was being quizzed by the Treasury Sub-Committee, added that market conditions could derail the timetable.
“In order to sell these shares we must have markets that are conducive, we must have good investor appetite and that is highly variable,” he said.
“We have had periods over the last 24 months during which markets have been closed effectively to the making of new issues of equity.
“A long period of muted risk sentiment and a lack of demand on the part of investors to increase their exposure to equity markets could have an impact on the deliverability of this sale.
“That could be a constraint on the time table.”
The Government faces a £26.2 billion loss on its stake in RBS, with the lender’s shares languishing well below the average 502p share price paid during the 2008 and 2009 bail-out – at around 258p at today’s prices.