RBS shares lower after UK government loses £2bn in stake sale

The British government take a loss after selling a 7.7% stake in the company

Article updated: 5 June 2018 11:00am Author: Graham Spooner

  • The British government has sold 7.7% of its stake, reducing its majority holding a decade after it bailed out the lender during the crisis-era
  • Shares in the Edinburgh-based bank have fallen by 3.4% in early trading
  • The Share Centre recommends RBS as a ‘hold’ for investors

The British government announced its first divestment since 2015 this morning as it reduced its majority holding. Its 7.7% stake has been sold at 271 pence which was a small discount to yesterday’s closing price.

This is part of a previously announced plan to sell out of its stake in the bank which it acquired as a result of bailing out the bank during the financial crisis 10 years ago. In exchange for the government bailout in 2008, RBS had to sell off businesses as part of a turnaround plan. The ultimate aim being to end up with a profitable UK based business that we, as indirect shareholders, will be able to sell off.

However, it has not been a great investment for the British tax payer as the shares were bought at the average price of around £5. Headlines are expected to be dominated by the deficit as a loss of more than £2bn has been realised.

A positive would be that institutional shareholders paid more or less the market price so they must have some confidence in the banks longer-term recovery. As well as this, the bank could be a step nearer to paying a dividend..

The negative is that the government still have a large holding of 62.4% which is set to overhang the market for some time; the government cannot sell any more for 90 days.

While shares are up slightly from a year ago off the back of improved performance and improved confidence leading to a change in our recommendation from a ‘sell’ to a ‘hold’, shares in early trading this morning have fallen by 3.4%. We maintain our ‘hold’ recommendation due to the increased likelihood of a dividend payment and the CEO’s restructuring plans.

All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to www.share.com. To understand how our Investment research team arrive at their views please read our Investment Research Policy.

Graham Spooner portrait photo
Graham Spooner

Investment Research Analyst

Graham started out as a fully authorised dealer on the Stock Exchange trading floor and for various banks, before becoming an FSA-approved investment adviser. Now a respected voice in the media, Graham’s share tips and comments on the markets are frequently sought by the national press.