With the Chancellor of the Exchequer having revealed in his Mansion House speech on 10 June that the government’s RBS shares are to re-enter the market, the question is now around the medium to long-term implications for investors.
While RBS is bracing itself for a potential multi-billion pound fine over the miss-selling of US sub-prime mortgages, James Box, a banking analyst at Brewin Dolphin is fairly positive on the outlook.
He believes that with the government willing to see for less than its £5 in-price (as at 11am on 11 June, RBS shares stood at 361p), shareholders who stand fast through the initial choppiness will eventually harvest the benefits.
“There are not many owners of RBS at the moment,” he expanded. “The announcement has really just made official what we knew was coming for a long time, and, although Osborne has set out his intent to sell, the timing is not yet certain.
“RBS has to pay out a huge fine in the US, and it is not yet clear what how much that will be. Once we know how much RBS will have to pay, that will be the catalyst for the government selling down, and generally it is positive that the government is willing to sell at this level rather than wait for their in-price of £5.
“There will likely be some positive developments for the stock. While shareholders will be less ‘exclusive’ with shares coming into the market, RBS is a very under-held stock and is pretty fairly-valued. If shareholders sit tight then there could be upside following the restructuring.”
However, with the £32.1bn sale likely to be a drawn-out process, Graham Spooner, investment research analyst at The Share Centre, is more reticent.
