Osborne could sell RBS stake in a year’s time

Tim Wallace
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THE GOVERNMENT could start selling chunks of RBS as soon as next year under a plan to recoup some of its investment in the bank.

RBS hopes to complete its post-bailout shake-up by early 2014, which would allow investors to see it in action in its new, slimmed down form. That includes the sale of 316 branches as required under EU state aid rules, and it is also expected to sell US unit Citizens next year for up to $15bn (£9.9bn).

The reforms may also see cuts to its investment bank operations. RBS will keep a major markets presence to service corporate clients, but insiders say the bank also needs to make sure it allocates capital in the most effective way, potentially shrinking investment banking and lending more to firms and households instead.

The government has also considered giving the bank away to UK citizens in an effort to boost confidence – though it would mean writing off the state’s stake – or waiting until the share price is above the bailout price, which could take another decade.

Instead it is thought to hope that sales of small chunks of its stake may be a better way to stimulate interest in the shares, driving up the price.

But despite the steps towards privatisation, the fallout from bad practices in the past is still hitting the bank. It is expected to set aside £800m to compensate small firms that were mis-sold interest rate swaps – a huge jump from the £50m previously announced.

It is also thought RBS will increase its PPI mis-selling provisions when it publishes its full-year results on Thursday.

The bank and the government declined to comment.