TAXPAYERS will have to wait years to recoup money invested in the Royal Bank of Scotland at the height of the financial crisis, analysts have warned a decade on from the bailout.

Its position is in stark contrast to Lloyds Banking Group, owner of Bank of Scotland, where the government’s shareholding has been steadily cut to less than five per cent in the years since its bailout.

State-backed Royal Bank looks to have lifted a major barrier on its road to recovery following proposals submitted by the Treasury to the European Commission, under which the bank would no longer have to sell its 300 Williams & Glyn branches.

Read more: Analysis - RBS is in a multi-billion pound mess but is slowly heading in the right direction

The bank, which was ordered to offload the branches as a condition of its £45 billion bailout in 2008 and 2009, is now proposing to spend £750 million on measures to boost competition in the UK banking sector, as an alternative to selling the network. That comes after Royal Bank incurred £1.8bn of costs in its ultimately doomed attempts to sell the branches and launch them as a standalone bank.

In total, the Williams & Glyn issue is expected to cost Royal Bank up to £2.55 billion.

While analysts expect the EC to accept the proposals, despite reports it could lead to be clash between Europe and the Treasury, experts warn there are many more hurdles to clear.

Analysts said that it will be some years before RBS will return to private hands.

Read more: Analysis - RBS is in a multi-billion pound mess but is slowly heading in the right direction

Michael Hewson, chief market analyst at CMC Markets, said that even if the European Commission accepts the Treasury’s proposals over Williams & Glyn, there are still major issues for the Royal Bank leadership to face.

Asked whether he thought Royal Bank, which remains 72 per cent owned by UK taxpayers, will remain in public hands for some years to come, Mr Hewson replied: “I would say so.”

“Now that Williams & Glyn has been put to one side, that’s good. We don’t have to worry about that. But that is not to say we don’t have to worry about a whole host of other factors.

He cited the expected multi- billion dollar fine from the US Department of Justice over the mis-selling of mortgage-backed securities, legal action from shareholders over the bank’s rights issue of 2008, and the possibility of further investigations into the activities of the bank’s Global Restructuring Group in the wake of the financial crisis. The bank announced last month it had set aside a further $3.8bn (£3.1bn) ahead of the expected fine from the US authorities over the mis-selling of mortgage-backed securities.

Read more: Analysis - RBS is in a multi-billion pound mess but is slowly heading in the right direction

Analysts said they had some sympathy with the bank’s leadership given the extent of the legacy issues they have had to work through. Graham Campbell, chief executive of Edinburgh-based Saracen Fund Managers, said: “It has been a long, long slog. The untangling of Williams & Glyn has been such a huge diversion for management, and it’s an incredibly difficult task. The recovery of RBS has been going for eight years now. This is hopefully the final leg of it.”

Highlighting the complexity of the problems the bank’s leadership have faced, Mr Campbell added: “It’s been frustrating for investors, but also I feel for [the] management.”

A spokesman for Royal Bank of Scotland said: “The timing of any future share sale is a matter for the UKFI (UK Financial Investments) and the Treasury. If agreed this proposal [to the EC regarding Williams & Glyn] would deliver an outcome on our EC State Aid divestment obligations more quickly and with more certainty than undertaking a difficult and complex sale and provide much-needed certainty for customers and staff.”

Mr Hammond said in January that the Treasury viewed the government’s stake in Royal Bank as a “long-term asset.”