RBS preparing for shares sale before next election

City Editor

Thursday 18 October 2012

ROYAL Bank of Scotland chairman Sir Philip Hampton said the bank is prepared for the Government to start selling shares before the next election and slammed as "silly" a European Union-mandated branch sale that collapsed last week.

REPORT: CEO Stephen Hester predicted the APS exit last week. CRITICISM: Royal Bank of Scotland chairman Philip Hampton said an EU call for it to sell branches was a 'silly proposition'. Picture: David Moir

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TIM SHARP CITY EDITOR

Sir Philip's comments came as part-nationalised RBS confirmed it will today exit the Asset Protection Scheme, a Government insurance programme.

Edinburgh-based RBS paid £2.5 billion to participate in the scheme that capped losses on £300bn of toxic assets.

Sir Philip told The British Bankers' Association (BBA) annual conference in London: "I think it's a reasonable aspiration, and it's consistent with what we are trying to do with our restructuring, to start selling the shares before the next election."He said later that RBS expects the first sale to occur in 2014 and indicated the bank is prepared to offer shares to small investors as well as sophisticated institutions.RBS last week successfully floated its insurance business Direct Line with a 30% stake sale that attracted significant numbers of private investors.Sir Philip said 82% state-owned RBS is "either on track or ahead of track" on reform plans adopted after its £45bn Government bail-out in 2008.Secretary of State for Scotland Michael Moore said: "The news RBS is to withdraw from the Asset Protection Scheme is a step in the right direction of returning the bank to the private sector."However, a major hurdle was placed in its way by the collapse of the sale of 316 branches, including six NatWest outlets in Scotland, to Santander.Sir Philip said the European Union's demand that it sell the portfolio, as a condition of its state-bail-out, was a "silly proposition".He said: "It has cost of hundreds of millions of pounds just to do basic IT for it."The sale must take place by the end of 2013 but it is up to the Government to appeal to the European Commission for any deadline extension on RBS's behalf.Sir Philip said banks have "let down" their customers in recent years and acknowledged that pay levels had been "grotesque".He said this is changing but "it is happening more slowly than it should have been".Meanwhile, Sir Win Bischoff, chairman of Bank of Scotland owner Lloyds Banking Group, said the key to rebuilding public support for the industry was better understanding of its role. He said: "There is a mystique about banking and I think we need to demystify it."HSBC's Glaswegian chairman Douglas Flint refused to pledge that HSBC would still be in the UK by 2020, stating its headquarters will be in "the best place".He told the BBA conference there is an "urgent need" for bank regulation to be settled.But former US Federal Reserve chairman Paul Volcker told MPs yesterday that plans to ring-fence UK banks' retail banking arms from their riskier investment banks could work for a while, but is likely to be "permeable over time".He said: "If you enforced a ring-fence right now, it would be effective. I would argue you might not have to go that far before there are holes in the fence. Over time, the holes are likely to get bigger rather than smaller."Meanwhile, John Cridland, director general of business lobby group the Confederation of British Industry, cited the bank manager in television series Dad's Army as he called for more relationship banking. He said: "My small businesses want a return to Captain Mainwaring banking."Paul Tucker, deputy governor of the Bank of England and a leading contender to succeed Sir Mervyn King as governor, indicated that banks might have to increase capital levels to withstand future crises.He said: "There is still a tangible probability, not a high probability, that the worst may still be ahead.

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RBS preparing for shares sale before next election

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