Royal Bank of Scotland Group (The) (RBS)


Cable casts doubt on RBS sell-off

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Cable casts doubt on RBS sell-off

Business secretary Vince Cable said on Sunday that it will be at least five years before the government sells its 81% stake in Royal Bank of Scotland (RBS).

His comments, made in an interview with the Sunday Telegraph, conflict with Prime Minister David Cameron's earlier assertion that the sale should be completed "as fast as possible".

The government purchased shares at a cost of 502p each as part of the £45 billion bail-out in 2008. On Monday, RBS shares were trading at around 329p.

The government plans to sell-off more state-owned assets over the coming years - keep up to date on the latest with Interactive Investor's Privatisations: Special report.

"I don't think it would be sensible for the government to set a rigid timetable, but given where we start from I think it is pretty unrealistic to think of RBS going back into private ownership this Parliament or probably within five years," Cable told the newspaper.

But as RBS reported £826 million of pre-tax profit in May, chairman Sir Philip Hampton said "the recovery process will be substantially complete in about a year or so's time" which could enable the government to start the sale of its stake from "the middle of 2014 on".

David Cameron also said in May that he wanted "to make sure progress is made as fast as possible".

The possibility of RBS being split into a "good" and a "bad" bank has also been discussed. This would mean underperforming assets including Ulster Bank and the £63 billion commercial property book would be split off to improve the health of the rest of the bank before privatisation.

"I think that there is a very strong argument for saying that the bank got too big and indeed that was the source of its undoing," said Cable.

"But we are having to balance the benefits of breaking up the bank [and] the potential benefits for competition [with] the significant costs, particularly in terms of disrupting IT systems.

"My colleagues in the Treasury are doing very detailed work on that cost-benefit calculation, because there is no simple yes or no answer."

Analyst view

"It could be worth keeping an eye on Royal Bank of Scotland after business secretary Vince Cable announced over the weekend that the bank is unlikely to be sold off until 2018," commented IG market analyst Alastair McCaig.

"Not renowned for his adherence to singing from the coalition's hymn sheet, it will be interesting to see what conflicting comments might appear over the week."