The Edinburgh-based bank today posted a bigger decline in operating profit than analysts estimated as it signaled the government could start selling its 81 percent stake as soon as next year. Johnson suggested putting the bank’s impaired assets into a bad bank, adding to similar calls from lawmakers and the central bank.
“I’d like to see it broken up and flogged off but of course they have got to wait till they can get the right price,” Johnson told Bloomberg Television in London late yesterday.
Lawmakers recommended in April that the Treasury conduct a review into the advantages and disadvantages of splitting up RBS and Lloyds Banking Group Plc (LLOY), a month after Bank of England Governor Mervyn King urged the government to break up RBS. Britain pumped 66 billion pounds ($103 billion) of public money into the two banks to keep them afloat at the height of the 2008 financial crisis.
The shares fell 5.8 percent to 289.60 pence as of 11:52 a.m. in London. The stock has dropped almost 11 percent this year, making RBS the worst-performing bank in Britain. The government would break even on its investment at 407 pence a share.
King argued that RBS should be split into a so-called good bank that could fund itself and a bad bank, where unprofitable assets would be transferred to the government, a move Chancellor of the Exchequer George Osborne has called impractical and disruptive.
RBS Chief Executive Officer Stephen Hester today told BBC Radio 4 today that any decision to break up the lender “must be for the government” because any such move would require “the use of taxpayer money in large amounts” to absorb the losses of a bad bank.
The lender is struggling to boost revenue at its U.K. consumer and commercial unit amid a faltering economic recovery and is under pressure from regulators to shrink its profitable investment banking unit.
Since Hester took over as CEO in 2008, he has shrunk the balance sheet, cut costs and announced more than 36,000 job cuts. He reduced assets at the so-called non-core business by 4.5 billion pounds in the quarter to 52.9 billion pounds from 258 billion pounds at the end of 2008. Operating costs declined by 3.5 billion pounds to about 4 billion pounds in the year- earlier period.
Chairman Philip Hampton said the government could start selling its stake in RBS about the middle of next year. Hester said that even if the government begins selling at a loss, it would ultimately profit on its holding as any divestment would probably take years.
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