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Seven years after bailout, Britain starts RBS sell-off with $3 bln stake sale

A sign is displayed outside of a branch of The Royal Bank of Scotland in central London, Britain May 20, 2015. REUTERS/Neil Hall

By Steve Slater

LONDON (Reuters) - Britain started the sale of a 2 billion pounds ($3.1 billion) stake in Royal Bank of Scotland (RBS) (RBS.L) on Monday, beginning the disposal of its holding in the bank seven years after a multi-billion pound bailout at the height of the financial crisis.

UK Financial Investments, the body that holds the government's RBS stake, said it would sell about 600 million shares, representing 5.2 percent of the bank, in a quick-fire sale to institutional investors after the market closed.

Britain owns 78 percent of RBS after rescuing it with 45.8 billion pounds of taxpayer cash at the peak of the credit crunch in 2008. Its stake will reduce to 73.2 percent.

The sell-off, being made at a loss on the price originally paid, had been widely expected to start soon after Finance Minister George Osborne said in June he was keen to start disposing of shares as soon as possible, and aimed to sell at least three-quarters of the stake in the next five years.

The disposal marks a milestone in Britain's recovery from the 2007/09 financial crisis and its drive to return RBS and Lloyds Banking Group (LLOY.L) to the private sector.

The government will make a loss on the first RBS sale since the shares were bought at an average price of 502 pence each and UKFI holds them on its books at 455p, including fees it has received related to the investment.

RBS shares closed on Monday down 1.3 percent at 337.6p and the government stake is likely to be sold at a slim discount to that price, possibly at between 325p and 330p, common in such large share placings.

Bookrunners on the sale have already received orders from investors to buy all the shares on offer, one bookrunner on the deal said. The sale is expected to be completed before Tuesday's market opening.


The sale is being handled by Citigroup (C.N), Goldman Sachs (GS.N), Morgan Stanley (MS.N) and UBS (UBSG.VX). UKFI and the Treasury said they would not sell any more RBS shares for 90 days after the sale without the consent of the bookrunners.

RBS was briefly among the world's biggest banks by assets after expanding with takeovers and aggressive lending prior to the financial crisis, and it has faced a long struggle back to health involving slashing its loan book and strengthening its capital ratios.

Chief Executive Ross McEwan narrowed the Edinburgh-based bank's focus to UK retail and commercial banking and it has slashed the size of its investment bank and sold businesses in the United States and around the world.

RBS has more than halved its assets to 945 billion pounds from 2.2 trillion at the end of 2008, while also cutting its number of staff globally to 109,2000 from 199,800.

Britain has sold down its stake in Lloyds at a profit over the past two years and said on Monday its holding was now below 14 percent, from 43 percent when it pumped in 20.5 billion pounds into the lender in 2008/09.

That puts the state on track to fully exit the bank some time next year, leaving the taxpayer with a profit of at least 2 billion pounds on the basis of the average price it paid for Lloyds shares.

In contrast, it is sitting on a 15 billion pound paper loss on RBS, based on the 502p average purchase price, or an 11 billion loss on the 455p price.

Osborne is hoping RBS shares will rise in value, however, and future sales could be at a smaller loss or even a profit.

(Additional reporting by Vikram Subhedar; Editing by Sinead Cruise and David Holmes)