The UK government has begun the process of selling its large stake in Royal Bank of Scotland, Graham Spooner, investment research analyst at The Share Centre, explains what this may mean for investors.
“After mounting speculation about the government’s first sale of RBS shares, this week, £2.1bn worth have been sold at a discount of 2.25% to Monday’s closing share price. The government has agreed not to sell any more shares for 90 days.
Those supportive of the sale may see this move as symbolic of the country moving on and away from the past financial crisis and signs of the bank restructuring will ultimately leave a business that is worth investing in.
“This sale will reduce the government’s holding on the bank from 78.3% to 72.9%. It is important for investors to note that Chancellor George Osbourne has argued the initial bailout was never out with the idea to make a profit. This is as a reaction to arguments that the government should have waited for the shares to recover closer to what taxpayers originally paid for them.
“We remain cautious on RBS and believe there are better opportunities for followers of the banking sector, such as HSBC which we currently recommend as a ‘buy’ for low to medium risk investors geared for income.”