Leading City analysts questioned the timing and pricing of the Government’s first sell-off of part of its stake in Royal Bank of Scotland, suggesting it may have been done at a low point for the shares.
UK Financial Investments, which manages the taxpayer stakes in RBS and Lloyds, said it had sold 630,000 shares at 330p overnight, raising £2.1bn for the Treasury. That crystallised a £1bn loss on the shares sold.
Ian Gordon, a banking analyst at Investec, told his clients: “We are perplexed by the Chancellor’s choice of timing. Last night’s disposal at 330p achieved a new 2015 low and arguably sold the tax-payer short.”
That conflicts with the advice given to the Chancellor, George Osborne, by UKFI’s chief executive, James Leigh-Pemberton, who wrote: “Given the feedback from the bookrunners… on behalf of the UKFI board I confirm that we are confident an accelerated bookbuilding would achieve a price which would represent value for the taxpayer.”
RBS shares rose 1.4p to 339p. Institutional investors who bought in Monday night’s placing received a 2.25 per cent discount to the closing price of 337.6p.
Sources said the placing was 3.4 times covered, allowing the Treasury to sell 5 per cent more shares than it planned originally. Of the 150 institutions that bought shares, about 60 per cent were hedge funds and 40 per cent long-only investors.
Mr Gordon pointed out that RBS shares had been above 400p as recently as February and said that he has a share-price target of 395p. He added: “Before the launch of last night’s accelerated bookbuild, governments of all political colours had chosen to reject superior sell-down opportunities.”
The sale cut the taxpayer stake in RBS, bought at a cost of £45bn in the 2009 bailouts, down from 78.3 per cent to 72.9 per cent.
David Madden, a market analyst at IG, said: “The taxpayer has begun to realise its loss on the struggling financial institution, and this is only the tip of the iceberg as Westminster will spend years unravelling its stake.”
Gary Greenwood, an analyst at Shore Capital, was less critical. He said: “It’s a good thing they have made a start but there is a long way to go.
“This sale was always going to come at discount and the Government has almost certainly accepted that it will never get back all the money that was put into RBS.”Reuse content