The Government should sell part of its stakes in state-backed lenders Lloyds and Royal Bank of Scotland at a loss to kickstart a disposal process that should see investors pay more at later offerings, a senior Rothschild banker told MPs yesterday.
"It is a good strategy to start a disposal programme with the first tranche at the lowest price," said Adam Young, joint head of equity advisory at Rothschild. "The loss is worth taking today because it is part of a programme," he told the Treasury Select Committee, which was taking evidence on the potential disposal of government stakes in Lloyds and RBS.
Taxpayers are sitting on a loss of more than £25bn from its £45bn rescue of RBS in 2008. It also faces a £12bn loss on Lloyds after pumping in £20bn to save that business.
Mr Young said there was concern among investors that RBS senior management could be hounded out by media and public fury over pay rewards before restoring the bank to health.
RBS's chairman Philip Hampton, pictured, and chief executive Stephen Hester waived their 2011 bonuses after politicians from across the board called on them to refuse the awards.
Robert Talbut, the chairman of the Association of British Insurers, told the committee he too was worried by the furore that surrounded Mr Hester's pay award and the perception of government interference in general.
"The company is still susceptible to being run as a political football," he said. "Its ability to retain a commercial management team is going to be severely inhibited if [RBS management] do not believe they are going to receive a significant market rate."Reuse content