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The UK is staring down the barrel of a massive loss on Ulster Bank parent RBS

The country’s government plans to start offloading its shares in the bailed-out bank.

THE UK GOVERNMENT plans to sell its shares in Royal Bank of Scotland despite its stake being worth nearly £14 billion (€19.3 billion) less than was pumped into the bank during its taxpayer-funded bailout.

Chancellor George Osborne said “in the coming months” his government would start selling its 80% share in RBS, which also owns Ulster Bank, even though it wouldn’t get back all the £45.5 billion (€62.5 billion) it sunk into the lender.

“Yes, we may get a lower price than (then-ruling party) Labour paid for it,” he said. ”But the longer we wait, the higher the price the whole economy will pay.”

It paid about £5 per share in 2008, but today the stock was trading at about £3.60 after rising slightly on the sale announcement. That puts the value of the UK government’s share at about £32 billion.

RBS Source: MSN Money

However the UK treasury’s has predicted taxpayers would lose £7.2 billion (€9.9 billion) when all the government’s RBS shares were sold, based on its share price as of last week.

The loss would be offset with the money the government made from other deals like the sale of its shares in the bailed-out Lloyds. The total return would still be £14 billion more than had been paid to rescue banks during the financial crisis, treasury said.

The UK government has also been told the value of its remaining shares in RBS could start to rise once some had been put on the market.

Lord Mayor's Dinner for Bankers UK Chancellor George Osborne Source: Yui Mok/PA Wire

Fines and losses

The banking group recorded a loss of £3.5 billion last year after a series of write-downs and the costs of legal action against it, although it still delivered a strong underlying profit.

Earlier this year it was fined a further £430 million for its part in rigging foreign-exchange markets.

In March last year RBS was tipped to be considering spinning off its struggling Ulster Bank business – potentially merging the lender with one of its Irish rivals.

RBS AGM Source: Danny Lawson/PA Archive

But in an October market update it confirmed Ulster Bank would remain “a core part” of RBS and that it could deliver good returns with the right investment.

Last year Ulster Bank turned its first operating profit since before the financial crash, delivering a return of £606 million for its parent company.

- With AFP

First published 10.27am

READ: Europe’s biggest bank will shed up to 50,000 workers on its 150th anniversary >

READ: Breaking the law has cost financial institutions €27 million since 2011 >

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About the author:

Peter Bodkin  / Editor, Fora

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