Government shelves plans to sell RBS and Lloyds shares - http://on.ft.com/28TgW3G
The sale of billions of pounds of taxpayer-owned shares in bailed-out UK banks has been shelved as a result of stock market turmoil spurred by the vote to leave the EU.
Plans to start the sale of £2bn of retail shares in Lloyds Banking Group over the next six months have been dropped owing to economic uncertainty following the referendum result, according to government advisers, dealing a blow to UK taxpayers.
Similar attempts to offload the 73 per cent stake in Royal Bank of Scotland as well as £17.5bn of loans issued by defunct lender Bradford & Bingley will also be pushed back, they said.
Shares in stocks in the banking sector plummeted on Friday on worries about their operations outside the EU. Shares in Lloyds dropped by a fifth, closing at 57p, well below the government’s break-even price of 73.5p.
Mark Garnier, a Conservative MP who sits on the Treasury committee, told the Financial Times: “All the work to repair share prices has been undone in one day. Any major share sale is a non-starter with this uncertainty. Plus we have political uncertainty with the leadership changes.”
He added that the knock-on impact in European markets shows “the uncertainty goes far and wide”.
Chancellor George Osborne had planned a “Tell Sid”-style sale of £2bn Lloyds shares in 2016, which would have finally offloaded the government’s stake in the bank eight years after the financial crisis.
Mr Osborne was expected to launch the share sale this autumn if the referendum outcome had been to remain in the EU. A spokesman for Lloyds said that “this was a matter for government”.
In the last Budget, Mr Osborne unveiled a blueprint for selling £17.5bn of former Bradford & Bingley loans, which would be the largest asset sale by a government in Europe.
The chancellor also kicked off the UK’s largest ever privatisation with the sale of a 5.2 per cent stake in RBS last August at 330p a share, incurring a £1.1bn loss for taxpayers.
RBS shares closed at 205.3p on Friday. The bank is already facing problems with offloading Williams & Glyn, the retail and commercial lender with 300 branches. RBS must carve out the bank by the end of next year as a condition of European Commission rules for receiving a bailout.
Questions are now being raised by investors over RBS’s ability to strike a binding agreement to sell the business by year end 2016 following the referendum results.
Even though the UK has voted to leave Europe, RBS is expected to still attempt to sell Williams & Glyn. The deal remains in place as it was made before the decision to leave the EU.
RBS has already been criticised for failing to begin the sale of Williams & Glyn in the first half of the year as planned, after months of technology complications.
The market upheaval and economic uncertainty will also put at risk government plans to sell the Bradford & Bingley loans, most of which are linked to buy-to-let investments.
Shares in buy-to-let focused lenders, such as Aldermore, plunged by up to 30 per cent on Friday.
Chirantan Barua, an analyst at Bernstein, told the FT after the vote results that “London is going to get absolutely hammered”, adding that “the buy-to-let guys are the biggest single short today”.
The Treasury was not immediately available for comment.