RBS, Lloyds Stakes May Be Sold by U.K. in 5 Years (Update1)
February 09, 2010, 6:09 PM EST(Adds party comments on bank stakes in fourth paragraph.)
By Robert Hutton
Feb. 9 (Bloomberg) -- British taxpayers may sell their stakes in Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc in five years, with RBS exiting the government asset- insurance program in “two to three years,” a panel of lawmakers reported, citing testimony by Treasury officials.
The report published today by Parliament’s cross-party Public Accounts Committee also cited Treasury officials saying they believe they will make a profit when the government stakes in the two banks are sold. It said the measure of “true success” for the privatization will be whether competition in the banking sector is maintained.
“What is highly uncertain is what the Treasury’s actions will eventually cost the taxpayer -- government estimates vary considerably,” committee chairman Edward Leigh, from the opposition Conservatives, said in a statement. “Hundreds of billions of pounds are at stake, with much turning on how good a price can be obtained.”
Chancellor of the Exchequer Alistair Darling says the government will only sell its stakes in the banks when the shares have recovered enough to make a profit for taxpayers. The Conservative opposition has pledged to “maximise” the return to the taxpayer should it win the general election due by June. Neither has committed to a timetable for disposal.
Prime Minister Gordon Brown’s government took stakes in the banks in the wake of the bankruptcy of the 2008 Lehman Brothers Holdings Inc. It bought 84 percent of Edinburgh-based RBS for 45.5 billion pounds ($71 billion) and 43 percent of Lloyds for about 20.5 billion pounds.
Bailout Estimate
In December, Darling scaled back his estimate for the overall cost of bailing out Britain’s banks to no more than 10 billion pounds from a previous estimate of 50 billion pounds. The National Audit Office said in December that support for the banking system was worth 846 billion pounds.
Late last year, Lloyds negotiated an exit from the government program that insured 260 billion pounds of its most toxic assets, and RBS reduced its insured assets by 43 billion pounds to 282 billion pounds.
Today’s report criticized the Treasury for offering its external advisers on the rescues, Credit Suisse Group AG and Deutsche Bank AG, “success fees” without defining “success.” That risks importing “wholly unacceptable” financial-sector bonus practices into the public sector, the lawmakers said.
-- With assistance from Gonzalo Vina in London. Editors: James Hertling, Andrew atkinson
To contact the reporters on this story: Robert Hutton in London at rhutton1@bloomberg.net
To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net
