Britain's chancellor of exchequer Philip Hammond has warned for the first time that Ulster Bank's parent, Royal Bank of Scotland, could be sold at a loss to taxpayers after its £45.5 billion bailout during the financial crisis, claiming that "we have to live in the real world".
Speaking in the House of Commons yesterday, Mr Hammond said the government was aiming to return RBS, which is 72 per cent backed by taxpayers, to private hands as soon as possible while achieving "fair value".
However, he said that “fair value could well be below what the previous government paid” at 502p per share. Shares in the bank are trading at 225p.
The chancellor added: “We have to live in the real world and make decisions on the future of our holding in RBS in the best interests of taxpayers.”
The chancellor’s comments come as the government prepares to announce within weeks the final sale of its stake in Lloyds Banking Group, which is less than 2 per cent.
People briefed on the selldown expect the government to sell out around mid-May at a profit running into hundreds of millions of pounds.
The disposal of Lloyds at a profit, nearly a decade after the financial crisis, sits in stark contrast with loss making RBS, which was briefly the largest bank in the world with a £2.4tn balance sheet in 2008.
In Mr Hammond’s spring budget, the Office for Budget Responsibility said it was expecting a £29.2 billion loss from bailing out RBS, based on the share price at the time.
The government kicked off its sale of RBS in August 2015, offloading 5.4 per cent of its stake, but drew fire for selling shares at a 52-week low that amounted to a £1.1 billion paper loss.
Mr Hammond recently warned that he had not budgeted to sell any shares in RBS for the next five years.
The bank is on track to post its tenth successive net annual loss next year, as chief executive Ross McEwan continues to work through a series of legacy problems. RBS, which reported a £7 billion loss for 2016, faces a huge multibillion pound penalty in the coming months from US authorities for mis-selling mortgage-backed securities during the financial crisis.
However, a large obstacle is being cleared for the bank as the government attempts to finalise a plan with Brussels for RBS to meet conditions for receiving £45.5 billion of state aid.
The plan, which involves providing funding and resources to other banks to boost competition for small businesses in the UK, will serve as an alternative to divesting 300 branches under its Williams & Glyn brand, a project that was hit with numerous delays while costing RBS some £2 billion.
Mr McEwan has signalled RBS is on track to return a profit in 2018, finally drawing an end to a decade of losses that have exceeded £50 billion since the financial crisis. – Copyright The Financial Times Limited 2017