Was the government right to sell the latest tranche of RBS shares at such a reduced price?
Fiona Cincotta, senior market analyst at City Index, says YES.
The government is not in the business of banking, and the share price of RBS is not about to jump significantly higher anytime soon, making break-even a distant dream.
RBS is now a very different bank to the one that the government bailed out – it is a massively slimmed-down version, with considerably fewer assets, and is solely UK-focused. It would be wrong to assume that this version of RBS could reach the break-even price within a reasonable timescale.
The timing is also really important here: there was a window of opportunity when both the market in general and the situation of RBS were presenting a relative calm.
The share price of RBS is up some eight per cent since March, and nerves over Italy and Spain have passed, but with Brexit negotiations set to kick off again, plus the absence of a solution to the Irish border problem prior to the European Summit later this month, demand for equities could be dented.
Read more: RBS shares slump as boss welcomes government share selloff
Russ Mould, investment director at AJ Bell, says NO.
George Osborne was criticised for selling a six per cent stake in RBS at 330p a share three years ago, so Philip Hammond will have been expecting brickbats for selling at 271p – and they are deserved.
It is the governments duty to try to maximise the returns from RBS for taxpayers. Whether it likes it or not, the government is an investor in the business, so it needs to think like one and take a patient, long-term view.
Selling now therefore seems strange, just when the bank is inching back into profit and towards paying the dividends which would also boost the Treasurys coffers.
The chancellors desire to use the proceeds of the sale to reduce government borrowing is laudable, and this will give him more room for manoeuvre when it comes to the 2019 review and state spending plans for 2020 and beyond.
Any increase then will come just in time for the 2022 General Election – and the whole thing feels politically expedient rather than fiscally prudent.
Read more: Government sells further RBS stake
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