Royal Bank of Scotland on the selling block

The market may not agree

10:35 15 May 2013

With the Royal Bank of Scotland showing a profit of £826million for the first quarter compared with a £1.4billion loss for the same time last year, Chairman Sir Phillip Hampton is suggesting that it’s possible the banking institution could be ready for sale by the middle of 2014 if not sooner.

This is by far the strongest signal that the government is preparing to sell the 81% tax-payers state in the bailed-out bank.

But the stock market was hardly impressed with the talk as RBS shares had the largest drop in the FTSE 100, dropping 5.5per cent to 289p, a level that represents a £19billion loss on the £45billion poured into the bank by the taxpayer during 2008 and 2009.

The ultimate decision to sell rests with the Treasury and would take place over a number of years.

Despite some critics, Hampton remains optimistic issuing a video message in which he reiterated his belief that drawing up a prospectus for shareholders could take place from the middle of 2014.

A prospectus is a financial document that details the bank’s financial performance and would have to be presented for shareholder’s review before the stake could be sold.

Stephen Hester, who became Chief Executive Officer during the banking crisis, was uncharacteristically optimistic.

The real issue however may not be as much about whether the bank is ready to sell the stake, but more about the price.

Due to the failing economy and tough regulations, bank shares are no longer as valuable as they once were. This means that some shares may have to be taken at a loss. And although the bank was back in profit overall, there were still huge downfalls in specific areas.