Royal Bank of Scotland Group Plc Chairman Philip Hampton signaled the Treasury may try to reduce its stake in the lender by 2015 as it left a government insurance program that covered its most toxic assets.
Hampton told a conference in London today it would be a “reasonable aspiration” for the government to start selling part of its 81 percent stake in the lender before the next U.K. general election. The bank earlier today agreed to exit the U.K.’s Asset Protection Scheme after paying 2.5 billion pounds ($4 billion) to the government to insure its most risky assets.
Britain’s biggest taxpayer-owned bank was in 2009 the only lender to join the program, which covered potential losses on 282 billion pounds of loans and derivatives. RBS never had to draw on the policy, for which it paid the government a fee, and has reduced the amount of loans protected to 105 billion pounds, the Edinburgh-based bank said in a statement today.
Leaving the APS removes an obstacle to the lender’s return to private ownership. Chief Executive Officer Stephen Hester has cut assets by more than 800 billion pounds, eliminated about 36,000 jobs and scaled back RBS’s securities and Irish units since he took over from Fred Goodwin when the bank was rescued in 2008.
The program “played an important role in stabilizing market perceptions of RBS after the impact of the financial crisis became clearer and the bank’s share price fell to a low of 10 pence in February 2009,” RBS said today in the statement. “This gave time for the bank’s new board and management to put its recovery plan into effect.”
The bank has approval from the Financial Services Authority for its exit, it said.
RBS rose 2.2 percent, to 286.1 pence in London, valuing the bank at about 32 billion pounds. The U.K. rescued RBS in 2008 at the height of the financial crisis, injecting 45.5 billion pounds into the lender, making it the costliest bailout of any financial institution. The stock trades a level equivalent to just over half the price at which the taxpayer bought its stake.
Chancellor of the Exchequer George Osborne said the decision to leave the APS is a step in the right direction toward getting the bank back into private ownership.
“During this Parliament the support provided by the taxpayer to the banking sector in the form of guarantees has fallen by over 450 billion pounds, a drop of almost 95 percent,” Osborne said in a statement released by the Treasury in London today. “The government’s strategy remains to return RBS to the private sector when it is value for the taxpayer to do so. Today is a step in that direction.”