Shares in Royal Bank of Scotland Group (LON:RBS) have fallen deep into the red in today’s session, as the UK government moved to trim its stake in the bailed-out lender. The move came after the company recently reached a settlement with the US Department of Justice over mis-sold mortgage-backed securities in the run-up to the financial crisis.
As of 08:31 BST, RBS’ share price had given up 3.35 percent to 271.50p, underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.04 percent lower at 7,737.96 points. The group’s shares have added about 4.5 percent to their value over the past year, as compared with a near three-percent gain in the Footsie.
Government trims stake in RBS
UK Government Investments (UKGI), the body which manages the taxpayer’s stake in RBS, announced in a statement this morning that it had completed the disposal of part of the Treasury’s holding in the lender. The disposal reduces the taxpayer’s stake in the bailed-out group from 70.1 percent to 62.4 percent.
UKGI said that the stake was offloaded at 271p per share, resulting in proceeds of £2.5 billion. The share sale, however, will generate a hefty loss for the taxpayer, with the government having bought its majority stake in the group at 502p per share in autumn 2008.
Reaction to RBS sale
“Few argue the RBS bailout was necessary to maintain financial stability, but the cost of that intervention is now starting to emerge,” said Laith Khalaf, senior analyst at Hargreaves Lansdown, as quoted by Reuters. “As a business RBS remains a work in progress, and consequently an investment for recovery investors with a long term investment horizon.”
The Guardian meanwhile quoted John McDonnell, the shadow chancellor, as saying that there was “no economic justification for this sell-off of RBS shares”.
“There should be no sales of RBS shares, full stop,” he continued. “But particularly with such a large loss to the taxpayers who bailed out the bank.”