Last updated: May 3, 2013 1:14 pm

RBS presses for sale of state stake

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The chairman of Royal Bank of Scotland on Friday said he wanted the UK government to be able to start selling its 81 per cent stake in the group from the middle of next year – or even earlier.

Sir Philip Hampton made the comments as the bank announced disappointing first-quarter results that prompted shares in the bank to fall 5.7 per cent to 290p at midday in London.

Senior Conservative politicians have been stepping up efforts to prepare for a reprivatisation of RBS and Lloyds Banking Group, which is partly state-owned, before the 2015 general election.

In a video statement released alongside the results, Sir Philip said RBS’s aim was to produce a prospectus that would enable the government “to start selling shares from, let’s say, the middle of 2014 on”.

He added: “It could be earlier, that’s a matter for the government. But certainly we think the recovery process will be substantially complete in about a year or so’s time.”

RBS had to be rescued by the UK government after overextending itself before the financial crisis.

Stephen Hester, chief executive, said: “Privatisation would be a terrific thing for the country, both psychologically and in terms of taxpayers’ money being freed up for other uses.”

Amid speculation that the government could be willing to sell shares at a loss, Mr Hester said “there may well be a cogent case for starting at a lower price” as broader economic weakness and tighter regulation had made banks less valuable.

The Treasury has never given an indicative price at which it would start to sell its stake and refuses to comment on whether it might do so below the “in price” at which Alistair Darling, former Labour chancellor, bought the shares in 2008.

It welcomed the results on Friday but declined to commit to a timetable for returning RBS to the private sector.

“We will return RBS fully to the private sector when it’s in the interests of the taxpayer to do so,” it said.

For the first three months of 2013 RBS made a pre-tax profit of £826m, a swing back from a £1.51bn loss in the same period a year earlier when the results were distorted by a £2.46bn accounting charge related to the changing value of its debt.

RBS actually got a £249m benefit from this much-criticised accounting quirk in the most recent quarter. It was also helped by the absence of any new payment protection insurance mis-selling charges.

However, it did take an extra £50m provision against the cost of clearing up the mis-selling of interest rate hedging products to small- and medium-sized businesses.

Operating profit fell 28 per cent to £829m, reflecting a particularly steep decline at its investment banking arm, which is being scaled down. This was less than the £1.2bn consensus forecast of analysts polled by Bloomberg.

“The underlying performance is weak,” said Ian Gordon, an analyst at Investec Securities, who downgraded his recommendation on RBS shares to a “sell”.

“It appears that the endless restructuring . . . is taking a heavy toll on [investment bank] revenues,” analysts at Deutsche said.

Additional reporting by George Parker and Jennifer Thompson

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