The Royal Bank of Scotland is expected to indicate this week that the Government will begin to sell off its stake in it before the end of the year.
Stephen Hester, chief executive of the bank in which the taxpayer has an 83 per cent holding, is expected to announce that the institution is on the road to recovery when he unveils its annual results on Thursday, paving the way for a sale of the Government's shares, according to weekend reports.
RBS is still expected to be in the red, with analysts predicting a pre-tax loss of £613m for 2010, but this is a marked improvement on the £3.6bn loss recorded for the previous year.
The group is also expected to write off another £9bn in bad debt, as a result of its exposure to the troubled Irish economy through its Ulster Bank subsidiary, although this too is down on the £13.9bn it wrote off in 2009.
It is thought that UK Financial Investments Limited (UKFI), the government body that looks after taxpayers' interests in the partly nationalised banks, will try to sell a small part of its holding later this year on the back of the improved result.
It has been suggested that UKFI may try to offload small parcels of the bank's shares at a low price to test the appetite of the market for the stock.
Selling just a 5 per cent stake in the group at the current share price of 48.53p would bring in £1.4bn for the Treasury.
But UKFI has to sell the holding at more than 50p a share if the Government is to make a profit from the bail-out of the bank.
RBS and its fellow part-nationalised bank, Lloyds Banking Group, are thought to have held meetings with sovereign wealth funds in recent months in a bid to drum up interest in their shares.
But it is thought that any sale of the Government's stake could be difficult to achieve until Sir John Vickers, chairman of the Independent Commission on Banking, has produced his final report on whether the UK's banks should be broken up. His initial report is due in April.
RBS has already announced that Mr Hester has been awarded a £2.04m bonus for 2010, although he will not receive a pay rise this year.
The group's investment bankers will share a bonus pool of under £950m, lower than the £1.3bn in 2009.
Mr Hester will receive his bonus in shares deferred for three years, while other staff will have upfront cash payments capped at £2,000.Reuse content