NAO nearly doubles size of loss on Government’s RBS stake sale


The Government’s only sale of Royal Bank of Scotland shares left the taxpayer nursing a bigger-than-expected £1.9bn loss, according to calculations by the National Audit Office that cast even more doubt on the state’s ability to profit from its rescue of the lender.

UK Financial Investments (UKFI) offloaded a 5.4 per cent stake in RBS to investors in August 2015 at 330p-a-share, raising £2.1bn in the process.UKFI is owned by the Treasury and manages the RBS stake at arm’s-length to the Government, the Telegraph reports.

At the time of the sale it was forecast that it represented a £1.1bn loss, based on the price at which the taxpayer bailed-out the stricken lender during its £45.5bn rescue between 2008 and 2009 at the height of the financial crisis.

However, the NAO, which has examined the circumstances of the disposal two years ago, believes the sale actually left the state £1.9bn in the red once the overall cost of purchasing the RBS stake is taken into account.

The Government’s generally accepted break-even price on RBS is 502p-a-share, although that slips to 499p once the income the Treasury received from redeeming preference shares is taken into account.

“This, however, does not factor in the financing costs of acquiring the shares,” the NAO said in a report on the 2015 sale. “We have calculated that if the costs of financing the intervention are also taken into account, the government would have had to sell the shares at 625p each to break even.”

Despite the loss, it still concluded the disposal achieved “value for money”.

RBS shares closed at 256.8 per cent this evening, up 2.1 per cent but well below the level at which the taxpayer could sell-down at a profit. The state still holds a 71 per cent stake in the loss-making bank.

There is growing acceptance that the taxpayer will suffer a big loss on the shareholding, with Chancellor Philip Hammond in April admitting to MPs that “we have to live in the real world”.

He said: “Our policy remains to return the bank to private hands as soon as we can achieve fair value for the shares, recognising that fair value could well be below what the previous government paid for them.”

The NAO’s calculation of an even higher break-even price raises the spectre of the taxpayer suffering an even bigger loss than previously anticipated.

In May, the Treasury finally sold down the last vestiges of its stake in Lloyds Banking Group, in which it took a 43 per cent shareholding during the crisis. Lloyds, which unlike RBS is profitable, claimed the state booked a £894m gain overall on its investment.