With the state’s stake in Lloyds now down to 13.9 per cent the starter’s pistol has finally been fired for the sale of Royal Bank of Scotland. The Government last night confirmed what had become the worst-kept secret in the City – that its creature, UK Financial Investments, has recommended the sale begin. But while UKFI’s work on Lloyds has generated a small, but important, profit for the taxpayer, an RBS sale, at least in its early days, will crystallise paper losses of hundreds of millions of pounds. And perhaps more. No matter, say proponents of the sale. It’s the thought that counts. It is the statement of intent, the signal that the Government is serious about the generational project of freeing RBS from the state’s embrace. Moreover, taxpayers should recoup some losses as the share price rises. So why not simply wait until the share price does rise? While RBS still faces heavy weather, the recent results were rather encouraging.
The company beat analysts’ forecasts; one even used the word “impressive” to describe its cost cutting. Its capital base continues to strengthen, and money set aside to provide for losses on loans and poor business in the past is flowing back to the company, even if its ultimate fate is to buttress provisions for penalties relating to past misconduct.
If progress continues, RBS becomes consistently profitable and starts paying dividends again, the shares will be in demand. RBS could even become another Lloyds. Instead, money is being needlessly lost.
Unions might like to remind the Treasury, which is also pursuing a pointless and costly retail offer of Lloyds shares, that its hands are hardly clean when it decries waste in the public sector.
