Investment bankers are preparing for the UK government to sell a stake in Royal Bank of Scotland worth about £3 billion after RBS has cleared a mis-selling fine with US authorities, according to a report in the Financial Times.
The newspaper cited two unnamed investment bankers “involved in the process” who said the UK government is likely to wait for RBS to settle a massive fine with the US Department of Justice over the mis-selling of mortgage-backed securities during the financial crisis before it restarts the process of selling its 71% holding.
The report cited another person “close to the process” saying that once RBS had dealt with the DoJ, the UK government would look to quickly restart the sell-off by offloading large equity stakes of about £3 billion to institutional investors using an overnight accelerated bookbuilding process.
Settling the penalty would clear the largest remaining legacy issue for RBS nearly 10 years after the financial crisis, the report said.
The timing of a settlement is in the hands of the DoJ and it could run into next year.
In an interview on the FT banking weekly podcast, RBS chief financial officer Ewen Stevenson said the impending fine was “a significant overhang on us and I think it’s holding back the government’s ability to privatise us.”
Speculation had mounted that the UK government would restart its sell-off in the summer despite the looming fine, in order to increase liquidity in the shares.
However, the opportunity closed after UK prime minister Theresa May’s government lost its outright majority in June’s election, the report said.
The FT quoted one person involved in the process as saying: “Selling ahead of the DoJ is a higher risk proposition . . . it would be better to have this behind us.
“But if we are in a situation where it could take a very long time, then we could be forced to take a different path.”