City financiers are planning to revive a radical plan to hand the government’s 71-percent stake in Royal Bank of Scotland Group (LON:RBS), The Telegraph has revealed. The news comes after the bailed-out lender revealed last week that it had returned to profit in the first three months of the year.
RBS’ share price rallied following the lender’s first-quarter results on Friday, adding 4.74 percent to close at 265.40p, outperforming the benchmark FTSE 100 index which ended the session in negative territory. The group’s shares have gained more than 15 percent over the past year.
The Telegraph reported over the weekend that Portman Capital Partners was preparing to approach UK Financial Investments (UKFI), the body which manages the taxpayer’s stakes in RBS and peer Lloyds (LON:LLOY), after the general election over a plan that could allow the Treasury to divest its holding in the group. The plan was first proposed by Portman about six years ago as an alternative to a traditional privatisation, with Barclays advising UKFI on how it might be implemented. The scheme, however, was subsequently shelved after former Chancellor George Osborne insisted the government must wait to see if it could recoup its investment in RBS.
Portman is now understood to believe that the plan could be revived after new Chancellor Phillip Hammond recently told MPs that he wanted to return RBS to private ownership “as soon as we can achieve fair value for the shares”.
The proposal involves the government giving taxpayers shares in RBS for free, and setting a ‘floor price,’ with investors allowed to sell once the price is reached. The hand-out will be accompanied by a more traditional share placing with institutional investors.
News of the plan comes after RBS updated investors on its first-quarter performance last week, revealing that it had made an attributable profit of £259 million in the first three months of the year, compared with a loss of £968 million in the prior-year period.