UKFI Says Investor Interest in RBS Grows on Capital GainsStephen Morris
Interest in Royal Bank of Scotland Group Plc is building among potential investors as its capital position improves, according to U.K. Financial Investments Ltd., which manages Britain’s stakes in bailed-out banks.
UKFI has met or spoken with its advisers at JPMorgan Chase & Co. more than five times in the past month to discuss a potential reduction in the government’s 80 percent stake in RBS, Oliver Holbourn, UKFI head of capital markets, told lawmakers in London today. Uncertainty over conduct and litigation is holding up any imminent large-scale sale of shares, he said.
“If you speak to institutional investors, they will tell you that Ross has made very good progress this year in terms of trying to make RBS a simpler, better bank,” Holbourn told the Treasury Committee. “We need more clarity around conduct and litigation and we probably need more clarity around the future shape of the corporate and institutional business before we feel we could deliver a good outcome for shareholders.”
Chief Executive Officer Ross McEwan has created an internal bad bank, merged units and is scaling back its investment-banking operations as he attempts to return the Edinburgh-based firm to profitability, strengthen capital and enable the government to cut its holding. RBS said last month buoyant U.K. and Irish economies boosted the value of its souring loans, helping reduce impairment charges and capital. The lender received a 45.5 billion-pound ($74 billion) taxpayer bailout in 2008 and 2009.
“The issue for RBS is that our stake is incredibly large and therefore we would have to think very carefully whether selling smaller blocks of shares would deliver a good outcome for taxpayers in our desire to try and dispose of all the RBS shares on some sensible timeline,” Holbourn said.
UKFI decided against permitting RBS shareholders a vote at the bank’s general meeting earlier this year on whether to allow bonuses of as much as twice fixed-pay to be paid to executives because of concerns of a “major public controversy,” UKFI Chairman James Leigh-Pemberton told the committee.
The manager initially backed the idea because “more variable compensation provides better alignment with shareholder interests,” and changed its position following talks with the government, Leigh-Pemberton said. He also said there’s been no material damage to RBS from people leaving as a result of the bonus decision.
“Whatever the reality, the perception will increasingly be that UKFI is being used as a fig leaf to disguise a high level of Treasury control of RBS,” Treasury Committee Chairman Andrew Tyrie said in a statement today. “UKFI should be wound-up and its resources absorbed back into the Treasury.”