RBS share sale a boon for recovery investors

The sale, which took place on Monday, saw the government incur a loss of £2.1bn as shares were sold at £2.71, almost half the £5.02 it paid during the financial crisis.

However, Architas investment director Adrian Lowcock, labelled this decision an “important step” for RBS and its investors.

He said: “Government ownership has hung over the stock for over 10 years now and been a sign of a lack of confidence in the company’s financials. Selling of part of the stake is a step along the road to full independence and a vote of confidence in the company’s financial health.”

Likewise, Laith Khalaf, senior analyst at Hargreaves Lansdown, said the share sale is “good news for private investors”.

Long journey ahead

This morning, the bank’s share price was down 4%, during early trading.

Khalaf explained that while the sale is a “step towards becoming a normal bank”, the government’s sale may put “downward pressure on the share price in the near term”.

“As a business RBS remains a work in progress, and consequently an investment for recovery investors with a long-term investment horizon,” he said.

Additionally, the sale means the government has reduced its stake in RBS from 70.1% to 62.4%.

Lowcock added that the removal of bank’s largest shareholder should mean that the share price will move more freely, but this will take time.

He said: “If Lloyds is anything to go by there is still a long journey ahead but when the government does sell its last piece of RBS it signifies the end of the one of the most contentious actions of global financial crisis.”

Earlier this year RBS returned its first bottom-line profit in 10 years, despite City analysts predicting the bank’s string of losses would continue.

Funds with the largest RBS holdings

Source: FE