Cameron Says Return on RBS More Important Than Timing
“It will take time, because this is a bank that is still healing,” Cameron said in an interview in his London office late yesterday. “As for when we get it back into the private sector, I just have two very simple concerns -- one is we must make sure this bank contributes to the recovery of the U.K. economy. Secondly, people put their money in. I want them to get their money out.”
Cameron’s comments signal there are no imminent plans for the government to sell its stake in the Edinburgh-based lender it took over in 2008 and 2009 to prevent its collapse. The government invested 45.5 billion pounds ($71.5 billion) in RBS in the world’s biggest banking bailout. Chief Executive Officer Stephen Hester announced two days ago he will quit by the end of the year to enable a successor to be in place when the government starts selling shares.
RBS, Britain’s biggest state-owned lender, fell 3.3 percent to 315 pence in London trading yesterday, below the 407 pence a share the government sees as the break-even price on its investment. The bank, which has started to cut 2,000 investment-banking jobs, said in a memo to employees yesterday it will exit its equity derivatives and structured retail products divisions.
“As we work with this bank as it’s nursed back to even further health, the public want to know ‘Am I going to get my money back?’” the premier said. “I think they are more interested in getting their money back than the time. Let’s get it right.”
Cameron paid tribute to Hester, saying that “he has done a good job” at the helm of the bank.
“He’s done an enormous amount to shrink the balance sheet and to get the bank into a more healthy position, to get it out of crisis and into recovery,” the prime minister said.
Asked if the government has a target share price before proceeding with an RBS sale, Cameron replied, “I don’t want to go into more detail, but my concern is getting the money back.”
Hester said last month that he saw a “cogent” case for the government to start selling its RBS stake, even at an initial loss. The average price the taxpayer would achieve for the entire holding in RBS would be higher than the government’s rescue price, he said.
Hester’s departure comes as the U.K. Parliamentary Commission on Banking Standards prepares to publish a report on the industry. Lawmakers hadn’t reached a consensus over whether to recommend RBS should be broken up, three people familiar with the discussions said last week.
After coming under pressure from government and regulators to bolster capital, the bank said in February it was considering how to shrink its investment bank further. It announced about 3,800 job cuts the previous year as well as plans to sell or close the unprofitable cash equities, mergers advisory and equity-capital markets divisions.
RBS sped up its succession plans because of the Treasury’s desire to start reducing its stake in the lender, Chairman Philip Hampton said yesterday. Hester told the BBC he was a “very willing participant” in the job handover.
Hester shrank RBS’s balance sheet by about 900 billion pounds and cut more than 36,000 jobs after he took over from Fred Goodwin amid the bank’s bailout in 2008 and 2009. He also oversaw the lender’s initial public offering of Direct Line Insurance Group Plc (DLG) in October, selling about 30 percent of the insurer and raising 787 million pounds.
RBS’s shares are down 2.9 percent this year, making it the second-worst performer among U.K. banks. Operating profit at RBS declined 29 percent to 829 million pounds in the first quarter, below the 1.2 billion-pound estimate of six analysts in a Bloomberg survey, the bank said on May 3.
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