Royal Bank of Scotland Group Plc Chief Executive Officer Stephen Hester said the lender may be ready to be returned to private hands before the 2015 general election, providing a boost for Prime Minister David Cameron.
RBS, which received the biggest banking bailout in the world in 2008, “will be ready to be privatized in the next couple of years,” Hester said today after the lender announced a wider-than-expected full-year loss.
Constrained by his self-imposed austerity program, Cameron may have few inducements for voters seeing their living standards fall as the recovery struggles to take hold. A sale of RBS shares could pay for a tax cut. Cameron has also kept open the option of giving away shares to the public. He urged Hester last week to accelerate the bank’s return to health.
“The government’s strategy lacks room for maneuver, so the privatization of RBS might just create a little bit of space that suggests to voters that economic improvement is on the way,” said Mark Wickham-Jones, professor of politics at Bristol University. “Money could be used to reduce the deficit but history suggests that it would give room to provide a sweetener for the election.”
The government, which injected 45.5 billion pounds ($70 billion) into RBS, still faces a paper loss on its investment. The bank said today its net loss tripled to 5.97 billion pounds after it set aside an additional 1.1 billion pounds to compensate clients wrongly sold insurance and interest-rate hedging products.
The shares were down 6.1 percent at 325.8 pence as of 3:39 a.m. in London trading. The government paid the equivalent of 502 pence a share for about 81 percent of Edinburgh-based RBS, meaning taxpayers are sitting on a paper loss of 16 billion pounds.
Hester, who took over from Fred Goodwin in 2008, has cut assets by 907 billion pounds from their peak, eliminated more than 36,000 jobs and scaled back the securities unit following the bailout. The bank is trying to complete the “most important” parts of its restructuring in 2013, he said. Efforts to prepare RBS for disposal are being hampered by regulatory fines for manipulating benchmark interest rates and provisions for customer redress.
RBS Chairman Philip Hampton said today that he wants to give the government the option to sell at least part its stake as soon as 2014.
“Privatization is now a light coming down the tunnel,” Hester told BBC Radio 4. “We’re doing our best to deliver a company that other investors want to buy.”
The government hasn’t set a timetable for the disposal of its stake in RBS, Cameron’s spokesman, Jean-Christophe Gray, told reporters today in London.
Hester said 2013 will be “another tricky year” for the bank. “We are chopping away at the bad inheritance we had” and by next year the bank will resemble a more normal company, he said. The bank would “ideally” start paying dividends again at the earliest opportunity, he said.