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Talks on Gulf stake sale add £545m to RBS value

Published on 28 March 2012

THE value of RBS soared by some £545m in one day's trading as it emerged that talks to sell a stake in the state-owned bank are being held with the Abu Dhabi royal family.

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The share price closed at 28.67p, with the value of the bank sitting last night at £17 billion following the speculation over a potential sale to the ruling al Nahyans, who bought Manchester City football club in 2008 and have business interests in the British banking sector.

Sources have claimed that British businesswoman Amanda Staveley, who is notable for her connections in the Middle East, is advising the ruling family on any potential deal.

The UK Treasury, which bailed out the failing bank with more than £45bn of taxpayers' money back in 2008, claimed that any discussions on the sale of a stake in the bank were completely routine and no announcement was due on any sale.

But a source familiar with the talks said to be orchestrated by Ms Staveley said discussions had been ongoing for six months.

A source close to the royal family, who spoke on condition of anonymity, said: "Abu Dhabi is always talking to parties to invest, including RBS. Whether it will materialise or not is too early to say."

The purchase of a stake by Abu Dhabi would be the first move on a large financial asset by Gulf investors since the 2008 financial crisis, when regional royals and sovereign funds bought into Citigroup, Credit Suisse and Barclays.

An Abu Dhabi Government official declined to comment.

Any sale of RBS shares would be unlikely for some time, given that taxpayers would lose almost half of their investment on any sale near current prices. The shares are trading at barely half the UK Government's average purchase price of 50p.

News of potential interest in Edinburgh-based RBS saw its share price jump for the second consecutive day yesterday, finishing at 28.66p.

David Butter, an independent Middle East analyst, said: "During the whole euro crisis, it's been interesting to see how the Gulf sovereign wealth funds have generally stayed away from making a move. Maybe now that things have settled down a little, there could be a shift in that thinking."

Gulf investors have historically had an interest in British assets, with vast investments made in London real estate and trophy assets such as the Harrods department store.

Mohammed Ali Yasin, an Abu Dhabi-based market analyst, said: "There's a long-standing strategic relationship between Britain and Abu Dhabi. If this deal does go through, it would be more about Abu Dhabi helping the UK, rather than a plan to invest in the banks in Europe or Britain."

Abu Dhabi made about £3bn after investing in Barclays during the financial crisis, in a complex deal that helped the bank avoid a state bailout.

Simon Denham, chief executive of Capital Spreads, said: "If they can turn their investment in RBS into anything like the returns they had on their Barclays shareholding, they will do very well out of it, which in turn should be to the benefit of the wider British economy."

RBS lost £2bn last year, its fourth straight annual loss. That renewed calls for the Government to consider kick-starting the sale of the stake at a loss to cut growing political interference, mostly on bonuses, pay and lending, and boost the appeal of the bank for private investors.

A UK Treasury spokesman said there would be no further comment on speculation over talks with Abu Dhabi. Earlier, he said stakes in the bank would be returned to the private sector when they started to offer value for money to the taxpayer.

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