Hargreaves Lansdown argues that the government’s sale of part of Royal Bank of Scotland Group (LON:RBS) is good news for investors but may put downward pressure on the shares in the near term, Citywire reports. The comments came after the Treasury moved to trim its holding in the bailed-out lender this week.
RBS’ share price slumped in the previous session, giving up 5.30 percent to close at 266.00p. The fall pressured the benchmark FTSE 100 index which shed 54.49 points to close 0.70 percent lower at 7,686.80.
Near-term hit to stock
Citywire quoted Hargreaves Lansdown analyst Laith Khalaf as commenting yesterday that the RBS share sale was good news for private investors in the lender because it marked “a step towards becoming a normal bank again, though government sales may put downward pressure on the share price in the near term”.
“As a business, RBS remains a work in progress, and consequently an investment for recovery investors with a long-term investment horizon,” the analyst pointed out, adding, however, that the taxpayer was ‘significantly out of pocket’. The government sold off the shares at 271p, significantly down from its buy-in price of 502p during the financial crisis.
Hammond defends sale
Chancellor of the Exchequer Phillip Hammond meanwhile defended the sale, arguing that it was a ‘significant step’ toward returning RBS to private hands.
“The government should not be in the business of owning banks. The proceeds of this sale will go towards reducing our national debt,” he pointed out, as quoted by the Guardian. “This is the right thing to do for taxpayers as we build an economy that is fit for the future.”
The newspaper further quoted John Glen, economic secretary to the Treasury, as telling BBC Radio 4’s Today programme that he “would love it if we could sell the shares at a much higher price – obviously, that is what everyone would like to do – but we need to be realistic and look at the market conditions”.