Skip to main contentSkip to navigationSkip to navigation
RBS sign outside branch
If the RBS deal is approved, it would reduce the government holding from 62.3% to 60.3%. Photograph: Philip Toscano/PA
If the RBS deal is approved, it would reduce the government holding from 62.3% to 60.3%. Photograph: Philip Toscano/PA

RBS seeks to buy government shares worth up to £1.4bn

This article is more than 5 years old

Bank hopes to obtain shareholder approval to purchase stake of up to 4.99%

Royal Bank of Scotland is looking to buy up to £1.4bn worth of shares from the government as part of efforts to cut the publicly owned stake in the lender, following its 2008 bailout.

The bank is seeking shareholder approval to buy a stake of up to 4.99% from the Treasury, in a move that would reduce the government holding from about 62.3% to 60.3%.

Shares bought by RBS would be cancelled, resulting in a smaller cut in the government’s total stake because there would be fewer shares in circulation.

The move follows months of speculation about how the bank will use its excess cash, having already spent £240m on its first shareholder dividend in a decade last October. About £150m of that total was pocketed by the Treasury.

RBS needs shareholder approval to launch formal discussions over the buyback. It will hold a general meeting in Edinburgh on 6 February to collect votes.

The bank’s chairman, Howard Davies, said: “This resolution would provide the bank with the flexibility to use some of its excess capital to buy back government shares at a time and price agreed with HM Treasury.

“The board believes that this is in the best interests of the bank and its shareholders by helping to facilitate the return of the company to full private ownership.”

RBS has been majority state-owned since 2008, when it received a £45bn bailout at the height of the financial crisis.

The government plans to sell the entire public stake by 2023-2024 but is projected to lose around £28.5bn in the process, according to the Office for Budget Responsibility.

The projected loss is the result of a drop in share price, with the Treasury having paid 502p per share in 2008. RBS stock closed at around 237p on Thursday.

The government disposed of 7.7% of its holding for £2.5bn last year after it determined that the bank “made significant progress on resolving its legacy issues”.

It came after RBS reached a $4.9bn (£3.7bn) settlement with US regulators over allegations that it mis-sold mortgage-backed securities in the run-up to the financial crisis. But the stake sale, which was the first since 2015, came at a £2.1bn loss. The Treasury is widely expected to sell another chunk of shares within the next year.

Commenting on RBS’s shareholder proposal, a Treasury spokesperson said: “The government should not be in the business of owning banks, which is why we’re committed to returning RBS back to private ownership. But we will only sell RBS shares when it represents value for money to do so.

“If passed, the vote announced today does not commit us to sell shares in any one way and we keep all options open.”

Most viewed

Most viewed