RBS stake may be sold to Abu Dhabi

The Government has been holding talks with Middle Eastern sovereign wealth funds over the sale of part of Royal Bank of Scotland.

The Coalition is desperate to start selling off the state's stake in Royal Bank – and Lloyds Banking Group – but this has been complicated by the fact that both banks' share prices still sit well below the"buy in" price at which it would make a profit.

The taxpayer paid an average of 50.2p for its RBS shares, but they closed last night at 27.75p.

Last night the Treasury declined to comment on who the Government might have held discussions with but it has been reported that it has been discussing a sale with funds in Abu Dhabi for several months. However, Government sources characterised discussions as informal and at an early stage.

Ministers faced sharp criticism over the sale of Northern Rock's "good bank" to Virgin Money at a substantial loss and would be wary of doing a similar deal over Royal Bank of Scotland.

A Treasury spokesman said: "The Government's policy has always been to return RBS to the private sector, but only when it delivers value for money for the taxpayer."