Watchdog says government's first RBS sale was "value for money" - even though taxpayers lost £1.9bn

Emma Haslett
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RBS was bailed out for £4.5bn at the height of the financial crisis (Source: Getty)

The body tasked with overseeing the government's finances has said the Treasury's first sale of shares in Royal Bank of Scotland (RBS) was "well planned... and represented value for money" - even though taxpayers lost £1.9bn in the process.

In a report this morning the National Audit Office (NAO) said the government's sale of 630m shares in RBS to institutional investors in August 2015 was "executed as skillfully as could reasonably be expected".


It added the 2.3 per cent discount to RBS' then-share price of 338p, which effectively meant taxpayers missed out on £1.9bn, was a smaller discount than has been achieved in recent privatisations.

Shares sold for 330p, raising £2.1bn and reducing the government's stake to 72.9 per cent. However, the NAO said the discount was "better than the four to seven per cent range advisers estimated, and the 4.3 per cent discount of comparable transactions in the previous 12 months".

Priority investors

It added: "Only 23 per cent of demand came from 'Tier 1' priority investor 2 - those who UK Financial Investments (UKFI) expected were most likely to form a stable long-term and supportive shareholder.

"Evidence from the privatisation of Royal Mail demonstrates that priority investors do not always hold for the long term."

UKFI is the body tasked with managing the government's financial holdings.


The NAO also said although details of the sale leaked to the market an hour before the official announcement, it had no impact on the sale price.

"The price achieved was at the top end of the bookrunner's expectations which were communicated before the leak.

"UKFI reviewed the amount of short selling in RBS stock before the transaction and concluded that it was not meaningful in relation to the size of the offering and not out of the ordinary relative to RBS's past levels or those of other UK banks."

Shares sold at a loss

In April this year chancellor Philip Hammond admitted it may sell the lender at a loss.

The government bailed-out by the government for £4.5bn, or 502p per share, during the height of the financial crisis, and while Hammond's predecessor, George Osborne, insisted RBS will only be sold once it reaches that level, the chancellor admitted the government has to "live in the real world".

In May the government sold its final stake in Lloyds, the other bank it bailed out during the financial crisis, netting a £900m profit in the process.

Shares in RBS slid 0.5 per cent this morning, to 255.6p.

Read more: Lloyds is out of taxpayers' hands: Here's what four City analysts think

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