Speculation has been rife over recent weeks that UKFI could be preparing to realise some of its investment, given the strengthening in the share price of both banks. Lloyds finished trading yesterday at 65.42p, while RBS closed at 45.95p – both only slightly below the average price of the government’s investment in the banks.
But sources within UKFI yesterday told City A.M. there is no chance any part of the stakes will be sold while the environment remains so volatile, with uncertainty hanging over the markets due to expectations of a further dip in prices and the possibility of a hung parliament.
They insisted the body’s mandate was to “add value” above all else, and that taking a longer-term view of where the share prices are heading would prove more useful than reaping short term gains.
A sale of convertible bonds is likely to remain on the table as one possible option for the government to recoup some of its investment, the sources said.
UKFI is understood to have held discussions with the Conservatives over the future of its activities after the general election next month, though the body has not been led to expect significant changes to its mandate if David Cameron comes into power.
UKFI last year appointed senior UBS investment banker Robin Budenberg as its new chief executive, stepping into the shoes of John Kingman, who left to rejoin the private sector. Budenberg had previously been instrumental in advising the government on structuring the bailout package for the UK banking system in the depths of the financial crisis.