George Osborne sells £2.1bn of RBS shares at a loss.

[TelephoneIgnoringMachine]

The government have now decided to sell £2.1bn of Royal Bank of Scotland shares, which is majority public owned. They are selling them at a loss, lower than the price at close of trading on Monday, and with no consideration for the interest paid by the treasury to borrow the money to buy the shares in the first place.

www.bbc.co.uk/news/business-33769906

I am baffled by this decision. I can see their point of view on the need to get the ownership of the bank back into private hands - however, with investors recommended to buy or hold their position, this decision seems ill-timed.

I wonder who be buying the shares.

[AllThePrettySeahorses]

I thought it was a ridiculous thing to do. Then again, it's entirely in keeping with Osborne's record of selling assets at a bargain price for a temporary economic boost so that he appears less incompetent than he is. Also in keeping with the Tory privatisation ideology - they sold off an awful lot of state assets in the 80s yet only once in 18 years managed to generate a surplus.

[silkoversatin]

Yep, another 1.2 billion bill for the poor to pick up.

[TelephoneIgnoringMachine]

The Governor of the Bank of England said recently that there should be
tougher sentences for "irresponsible" traders, although this apparently doesn't apply to Osborne...

[prh47bridge]

Yep, another 1.2 billion bill for the poor to pick up

No, there is no bill for anyone to pick up. The government paid for the shares a few years ago - that was while Gordon Brown was PM. That added to the national debt but helped to keep the bank afloat. They have now sold the shares. The income will help reduce the government's deficit this year. It will also make it easier for RBS to complete its recovery as it is no longer partly owned by the government.

The government didn't invest in RBS to make a profit and, to be honest, it is unlikely it would ever have made a profit on the deal. It could perhaps have made a smaller loss.

[YonicScrewdriver]

It's not irresponsible trading. It's a very difficult position for both the government and the bank from a governance perspective. A anyone selling such a large tranche of shares in anything is likely not to be able to do so at the standard market price.

[TelephoneIgnoringMachine]

They could have made considerably more, though, if they'd sold them in February, when the price was 70p higher.

[YonicScrewdriver]

It may have been impossible to sell them that close to pre election purdah. I assume deals have been done for blocks of shares which all have to transact simultaneously also - they can't sell on the open market.

[YonicScrewdriver]

...without impacting the price.

The government is in an awkward position as everyone knows it wants to sell.

[YonicScrewdriver]

And no one has a crystal ball - doubtless if they'd sold in feb and then later this year the price goes above £4 then they'd be criticised for not holding...

[YonicScrewdriver]

Or perhaps I'm wrong and you shorted RBS in Feb, OP, and you're now sitting on a huge profit?

[TelephoneIgnoringMachine]

Ha. I wish. We (DH & I) will be rather poorer next April.

[TelephoneIgnoringMachine]

It would appear there is suspicion that someone else may have done something like that.

[YonicScrewdriver]

Not in Feb though!

Hedge funds short stocks a lot and it's quite possible that the judgement of many was that, post the election and the recent results, selling of the stake might begin. Or it's possible that someone has acted on insider information - time will tell.

[silkoversatin]

Really prh47bridge? "The government paid for the shares"! Did they raid their own piggy banks to pay for it then? Why is the Share price of RBS below what WE paid out seven years ago d'you suppose? Could it be because all those spiv bankers know that the Government will sell at some stage, so they keep it low, then the price will miraculously rise as soon as they are sold?

I'm afraid the world sees this for what it is. Crony capitalism. Osborne is a Crook, selling our companies to his friends and family at knockdown prices.

This sale is yet another Neo Liberal political decision taken by the boy Gideon. 'Balancing the books' is an irrelevance. Tories helping to make the elite even richer, while leaving everyone else to sink.

[YonicScrewdriver]

That was not PRH's point, silk.

The money was spent in saving the bank. It was "lost" at that point.

Any forced and distressed purchase by a large purchaser who needs to sell at some point (be that a government or a parent group, like the co op group and the co op bank) will attract a lot of attention from short sellers like hedge funds.

With the size of the government stake, RBS is not a "normal" stock. If the price rises now then it's a good thing as the government still holds a very considerable stake, I believe - this is just the first sell off.

What would you have done differently, silk? You cannot seriously think the chancellor of the exchequer is deliberately making his own job harder to the tune of a couple of billion?

[YonicScrewdriver]

When Gordon brown sold the country's gold reserves when gold was at a ten year low, was he also pandering to a Neo liberal elite, whatever that is?

[TelephoneIgnoringMachine]

The country was told at the time that the RBS shares were bought, that they would probably be sold again eventually, but it was never the intention that they be sold at 1/3 lower than the purchase price.

[TelephoneIgnoringMachine]

I didn't like Gordon Brown either.

[YonicScrewdriver]

"but it was never the intention that they be sold at 1/3 lower than the purchase price."

there was no way to predict the timescale for the sale, the outcome of the next election etc atvthe time. It was a massive moment of global crisis.

I don't know what has prompted the partial sale at this time / further sales may be at higher or lower prices - but if it was a choice between this and cutting some other budget item for lack of free cash, or may well have been the best of a set of choices. Or a spectacular misjudgment, like the gold (as brown helped keep us out of the euro and made the Bank of England independent, I suspect history will come out with a net positive judgement on him)

[TelephoneIgnoringMachine]

Personally, I'd vote for getting rid of Trident. We could save a lot of money there, & it didn't exactly end well last time a nuclear bomb was used against another nation. What are we keeping it for. In case aliens come?

[niceguy2]

I think firstly we have to remember that Osbourne/Tories didn't buy the shares to sell at a loss. They inherited the shares from Brown/Labour whom (in my opinion rightly) bought RBS to stave off a wider crisis.

So whilst it's a shame that we didn't manage to sell the shares at a profit, ultimately no-one knows how the share price will go. Of course with the benefit of hindsight then Feb was a better time to sell. But Gideon doesn't have a crystal ball any more than any of us have.

Selling public assets at a poor price is hardly a Tory trait. Gordon Brown selling our gold at the lowest point in the market in comparison makes George look like a bloody economic genius.

I think we've held onto the shares long enough now. The money can be better used elsewhere than being tied up in a bank we didn't want in the first place.

Put in context whilst £1.2billion is a lot of money, in terms of the size of our economy it's barely even worth a footnote.

[YonicScrewdriver]

Niceguy, they've sold just over 5% - they've got 71% left to go. It'll be a long haul before the line is drawn under this at last .

Completely agree with your post otherwise.

[FurtherSupport]

I actually think GB handle the whole crisis really rather well - it wasn't of the Labour government's making, way more complex than that.

The cynic in me thinks that the timing of this sale is to "prove" Labour got it all wrong, when in actual fact they dealt with an impossible situation very well - hence UK suffered far less from the whole crisis than most of Europe or the US.

[prh47bridge]

Did they raid their own piggy banks to pay for it then

YonicScrewdriver is correct that you have misunderstood my point but just to answer your question, in effect yes.

The government borrowed money to fund the purchase of RBS shares. The borrowing took the form of gilts - interest bearing bonds bought by investors for periods of up to 50 years. This is the way the government usually borrows money. When these bonds mature (i.e. have to be paid back) it is likely that the government of the day will simply sell further gilts to cover the cost. So the taxpayer is only funding the interest on the gilts.

I'm afraid the world sees this for what it is

You may see it as crony capitalism. Thankfully the world doesn't for the simple reason that it isn't. RBS is worth substantially less than it was when the government bought the shares. Remember that it has made a loss every year since the government bailed it out. If the government was selling the shares for less than they are worth the charge of crony capitalism might stick. They aren't. Whilst the future is impossible to predict it looks like it will be a very long time before the shares are worth as much as the government paid for them. Indeed, some independent experts believe that, taking inflation into account, RBS shares will never reach that level whilst the government still has a substantial shareholding which causes governance issues for the bank.

[silkoversatin]

You may see it as crony capitalism. Thankfully the world doesn't So you know what 'the world' is thinking and can speak for it can you prh? That's nice to know I may get back to you ...

We take a £13 billion loss to sell off shares now? Doesn't that sound a bit iffy to the world? Royal Mail - more share sell offs to institutional investors - is there a Tory pattern here I'm wondering? Perhaps the world can put me straight?

The public should own this bank outright and all profits should go towards rebuilding this country and its economy. Instead of giving the city yet another free ride at our expense.