As the British government take a loss on RBS share sale Graham Spooner, investment research analyst at The Share Centre, comments on what it means for investors:
“The British government announced its first divestment since 2015 this morning as it reduced its majority holding. Its 7.7% stake has been sold at 271 pence which was a small discount to yesterday’s closing price.
“This is part of a previously announced plan to sell out of its stake in the bank which it acquired as a result of bailing out the bank during the financial crisis 10 years ago. In exchange for the government bailout in 2008, RBS had to sell off businesses as part of a turnaround plan. The ultimate aim being to end up with a profitable UK based business that we, as indirect shareholders, will be able to sell off.
“However, it has not been a great investment for the British tax payer as the shares were bought at the average price of around £5. Headlines are expected to be dominated by the deficit as a loss of more than £2bn has been realised.
“A positive would be that institutional shareholders paid more or less the market price so they must have some confidence in the banks longer-term recovery. As well as this, the bank could be a step nearer to paying a dividend.
“The negative is that the government still have a large holding of 62.4% which is set to overhang the market for some time; the government cannot sell any more for 90 days.
“While shares are up slightly from a year ago off the back of improved performance and improved confidence leading to a change in our recommendation from a ‘sell’ to a ‘hold’, shares in early trading this morning have fallen by 3.4%. We maintain our ‘hold’ recommendation due to the increased likelihood of a dividend payment and the CEO’s restructuring plans.”