UK government starts RBS share sell-off

LONDON (ShareCast) - (ShareCast News) - The UK government said it has started the sell off of its 79% stake in Royal Bank of Scotland (LSE: RBS.L - news) , with a tranche of 600m shares, or 5.2% being offered to institutional investors at a loss to the taxpayer.

The controversial sale, to take place overnight, will spark criticism of British Chancellor George Osborne as the shares are well below what the government paid for them.

The announcement, made after the stock market had closed, came from UK Financial Investments, the body which looks after the taxpayer stakes in the bailed out banks.

RBS shares closed down 4.6p to 337.6p, well below the average price of 502p the government paid in 2008 and 2009. At today's closing price the government would raise just over £2bn for the stake up for sale - a loss of £1.03bn.

Osborne had signalled in his Mansion House speech in June that he was set to start the sell-off.

British taxpayers spent £45bn bailing out the bank to save it from bankruptcy in 2008 in the midst of the financial crisis. Osborne told bankers in his June speech that overall the government would still make a £14.3bn profit on the rescue programme for banks.

He justified this by including revenues from sales in Lloyds, Northern Rock and the mortgage arm of Bradford & Bingley, which also required taxpayer bailouts.