US mega fine looms over sale of RBS

Hayley Kirton
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RBS is facing a similar issue to Deutsche Bank in the US (Source: Getty)

​A possible US fine of $5bn-$12bn or more has hit the pause button on any further sale of the government’s huge holding in embattled lender RBS, two top officials told MPs yesterday.

The boss of UKFI – the organisation charged with advising government on the sale of assets picked up during the financial crisis – said there was too much uncertainty to make a call on when RBS’ share price would be at a suitable level to sell the stock.

Appearing before the influential Treasury Select Committee, UKFI chief exec Oliver Holbourn pointed to the looming fine from the US Department of Justice (DoJ) for mis-selling mortgage-backed securities, as well as questions surrounding the sale of Williams & Glyn, as two critical reasons why it could not give an indication of when the shares could be shed.

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“We are now back, unfortunately, in wait and see mode until these issues are resolved,” Holbourn said.

Yesterday’s hearing comes almost two months to the day after it was revealed Deutsche Bank’s DoJ fine, which focuses on the same issue as RBS’, could be as high as $14bn (£11.2bn).

The size of Deutsche Bank’s fine sent its share price on a downward spiral, particularly after it was reported German Chancellor Angela Merkel would not be willing to offer state assistance. Deutsche’s shares have since recovered, however.

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James Leigh-Pemberton, chairman of UKFI, told the MPs yesterday that the size of RBS’ fine was still up in the air, saying there had been speculation that it could be $5bn, $12bn or even more.

The grilling also came less than a month after RBS released its third quarter results, revealing not only an almost £500m loss but also that it did not expect to be able to divest of Williams & Glyn in time to meet the end of 2017 deadline it had been given as part of its state bailout deal.

However, the committee members seemed unimpressed with the reasons given, with Tory Jacob Rees-Mogg noting the factors listed may well have already been priced in by the market.

“This seems to me to be a constant argument for doing nothing,” Rees-Mogg said.

Read more: Santander returns to negotiating table for RBS' Williams & Glyn

In contrast to the 73 per cent state owned RBS, chancellor Philip Hammond announced last month the government was preparing to sell its remaining stake in Lloyds.

The Treasury shed part of its original 78 per cent holding in RBS last summer, opting to sell at 330p per share, a significant discount on the roughly 500p per share the stake was originally purchased for.

RBS’ shares, which closed down 1.9 per cent at 208.4p yesterday, have lost almost a third of their value over the course of the last 12 months.

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