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Government Nets £2.1bn From RBS Share Sale

After seven years the government has begun selling its stake in RBS (LSE: RBS.L - news) . Yesterday it sold £2.1bn worth of shares at a loss to the taxpayer of over £1bn.

The overall size of HM Treasury's economic interest in RBS will be reduced from approximately 78.3% to approximately 72.9%.

Yesterday's sale of 333,000 shares, 5.4% of the government's stake, means that the tax payer has lost £1,084m from its investment in RBS.

This is because the bailout took place at an average ‘in-price’ of 502p, whilst yesterday's deal price was just 330p meaning that the government and therefore the taxpayer lost £1.72 on every share that it sold.

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George Osborne's argument is that the bank was never bailed out with a view of making a profit but was instead bailed out to safeguard the UK's financial security, he is therefore no longer prepared to wait for the shares to recover to the average 'in-price' of 502p.

Global banks; Citigroup (NYSE: C - news) , Goldman Sachs (NYSE: GS-PB - news) , Morgan Stanley (Xetra: 885836 - news) and UBS (NYSEArca: FBGX - news) orchestrated yesterday's share sale but have each been instructed by UK Financial Investments Limited (UKFI) and HM Treasury not to sell further RBS shares for at least 90 days without prior written consent from a majority of the other selling banks.

In a report Osborne commissioned from Rothschild, the investment bank, his advisers concluded that disposing of the taxpayer's entire stake in the bank would crystallise a £7bn loss if fees paid to the Treasury since 2008 were taken into account.

The government also announced a further disposal of Lloyds shares yesterday which lowers its stake to 13.99%. Unlike RBS, the taxpayer would make a £1.9bn profit from its Lloyds intervention assuming it would be able to offload its remaining stake at current market prices.