RBS shares rise after British government unveils sale plan

Shares in Royal Bank of Scotland rose on Thursday after Britain's Finance Minister George Osborne said the government would start selling its shares in the bank.

In his annual speech to financiers in the City of London on Wednesday, Mr Osborne said the government would begin selling off its 80 per cent stake in the bank, worth £32 billion (€43.9 bilion), after taking independent advice from investment bank Rothschild and the Bank of England.

Shares in RBS were up 1.1 per cent by 0740 GMT.

Analysts said there would be significant interest from institutional investors willing to overlook ongoing issues relating to past misconduct at RBS and uncertainties over Britain’s continued membership of the European Union.

The institutions, some of which are based in the United States, see the bank as a play on Britain’s economic recovery.

They are also attracted by RBS’s modest valuation. The bank’s market value is currently just 0.8 times that of its assets, according to Thomson Reuters data.

By comparison, state-backed Lloyds Banking Group, in which the government has already sold almost half its stake, trades at 1.3 times the value of its assets.

“I would say demand is high from large institutions in the US, the UK and Europe. It’s a very attractive risk/reward payoff with potential excess capital down the road,” Jefferies analyst Joe Dickerson said.

Reuters