TAXPAYER-owned Royal Bank of Scotland (RBS) has moved to speed up its privatisation after its shareholders yesterday approved a plan to allow it to buy back up to £1.5 billion of shares from the UK Government.
A total of 98.7% of investors approved the proposal at a general meeting at the lender’s headquarters in Edinburgh.
The Government, which still owns 62% of RBS, did not vote on the resolution.
A special resolution put to the meeting sought shareholders’ permission to make off-market share purchases from the Treasury through a “directed buy-back” scheme, which will have to be approved by the Bank of England.
Under that, RBS will be able to buy back up to 4.99% of the Government’s stake in any one year.
READ MORE: Light at end of tunnel for victims of controversial RBS restructuring arm
However, one shareholder at the Gogarburn meeting described the plan as “abhorrent”, and argued that RBS should be holding back the cash to pay compensation for potentially huge legal settlements.
He also accused the bank of “running scared” from a potential General Election and resultant Labour government, which would seek to nationalise the bank.
However, chairman Howard Davies said: “This is something that the board has carefully considered.
“The bank has a sufficiently strong capital position. They [Labour] will have to speak for themselves.”
RBS has been majority taxpayer-owned since 2008, when it received a £45bn bailout at the height of the global financial meltdown.
The Treasury had planned to sell its stake in the lender by 2024, but is expected to lose billions of pounds in the process.
RBS was bailed out at 502p per share in 2008, but its stock is trading at around 249p today. Its share price has fallen by 22.8% in the past year alone.
Shares purchased from the UK Government are expected to be cancelled, a move that would increase the value of the bank’s outstanding shares.
RBS has been exploring a share buy-back programme since last year when it declared its first dividend in a decade to bring its public holding to less than 50% by the end of the current parliament.
In the autumn Budget, Chancellor Philip Hammond said the Government intended to exit its ownership of the bank by 2024.
RBS said the buy-back could happen as part of a placement by the Treasury at a price determined through an open-market book-building process.
Alternatively, it could take place via a bilateral deal whereby the bank buys a certain number of shares at the relevant market price agreed with the Treasury, independent of any larger placement of shares by the Government.
The final method under consideration would be a trading programme in which a broker is nominated to oversee the daily purchase of a percentage of shares at the market price.
After shareholders approved the buy-back programme, a Treasury spokesman said: “The Government should not be in the business of owning banks, which is why we’re committed to returning RBS back to private ownership.
“But we will only sell RBS shares when it represents value for money to do so. Today’s vote does not commit us to sell shares in any one way and we keep all options open.”
RBS is due to publish full-year results on February 15.
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