June 4, 2018 / 4:17 PM / 21 days ago

UPDATE 3-British taxpayer set to lose billions in $3.5 bln RBS sale

* Britain to sell 7.7 pct of RBS overnight

* Deal crystalises hefty loss for taxpayers

* Resumes reprivatisation process

* GRAPHIC: reut.rs/2LjG3jK (Adds statement from British opposition Labour Party's finance chief John McDonnell)

By Emma Rumney and Lawrence White

LONDON, June 4 (Reuters) - Britain is selling some of its stake in Royal Bank of Scotland for about 2.6 billion pounds ($3.5 billion), although it will realise a significant loss as it unwinds its holding and returns the bailed-out lender to private hands.

The government said on Monday it would sell about 7.7 percent of RBS, which was rescued in a 45.5 billion pound bailout at the height of the 2008 financial crisis, reducing its overall stake to 62 percent.

Britain will make a loss on that investment, since the same number of shares were worth around 2 billion pounds more when the government made its initial and largest capital injection into RBS, at a price of 502 pence.

The loss for taxpayers would be even greater when taking into account a break-even price of 625 pence per share estimated by Britain’s National Audit Office, which includes the cost of financing.

“There is no economic justification for this sell-off of RBS shares,” said British opposition Labour Party’s finance chief John McDonnell, responding to reports on the sale.

“There should be no sales of RBS shares, full-stop. But because of this government’s obsession with privatisation, the taxpayers who bailed out the bank will now incur an enormous loss,” he said.

For RBS the sale marks the start of the last leg of a decade-long struggle to return to normality.

“Few argue the RBS bailout was necessary to maintain financial stability, but the cost of that intervention is now starting to emerge,” said Laith Khalaf, senior analyst at Hargreaves Lansdown.

RBS has reached a series of such milestones since the start of this year, including the resolution of an investigation by U.S. authorities into its sale of mortgage backed-securities in the run-up to the crisis.

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

RBS, whose shares closed at 280 pence on Monday, declined to comment on the sale process, which is being managed by Morgan Stanley, Citigroup, Goldman Sachs and JPMorgan.

The investment banks have already found buyers for all the shares, according to one of them, filling the order book within half an hour, in an indication of investor interest.

The shares will be sold on Monday evening in a process known as an accelerated bookbuild to institutional investors, UK Government Investments, which manages the holding, said.

Final pricing of the deal will become clear on Tuesday.

The sale resumes a process the government began in 2015 when it sold the first tranche of its RBS shares - 5.4 percent of its stake - for 330 pence per share, at a 1.1 billion pound loss.

That prompted criticism from opposition politicians, who accused the government of poor timing. Subsequent sales were put on hold pending the agreement of the multi-billion dollar settlement with the U.S. Department of Justice. ($1 = 0.7521 pounds)

Additional reporting by Dasha Afanasieva and Shalini Nagarajan; Editing by David Goodman and Alexander Smith

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below