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London - Britain took a £1.1bn loss on its first sale of shares in Royal Bank of Scotland (RBS) on Tuesday, sparking accusations from opposition politicians of an unnecessarily rushed and costly disposal.
The UK government sold a 5.4% stake in RBS at 330 pence per share, a third below the price paid when Britain rescued the British bank with £45.8bn of taxpayer cash at the peak of the 2007/09 financial crisis.
Britain raised £2.1bn, but lost a substantial sum on the first of many blocks of shares to be sold. Overall it is currently sitting on a £15bn loss on its holding.
Finance Minister George Osborne hailed the start of returning RBS to the private sector and said it was right to commence selling at a loss.
"While the easiest thing to do would be to duck the difficult decisions and leave RBS in state hands, the right thing to do for the economy and for taxpayers is to start selling off our stake," Osborne said.
But the opposition Labour Party slammed the sale.
"RBS had to be bailed out urgently, but it doesn't have to be sold off at the same speed," said Chris Leslie, shadow finance minister.
"The Chancellor needs to justify his haste in selling off a chunk of RBS while the bank is still awaiting a US settlement for the mis-selling of sub-prime mortgages," Leslie added, referring to a potentially massive fine from US authorities against RBS, related to past sales of US mortgages.
RBS has set aside £2.1bn pounds for a settlement but has said the timing of a deal is uncertain. Analysts estimate it could cost as much as £9bn.
However the share sale, which cuts the taxpayers' holding to 72.9% from 78.3%, still marks a milestone in Britain's recovery from the financial crisis, as well as forming a plank in Osborne's strategy to improve the country's finances.
More power
The divestment had been on the cards since Osborne in June accelerated the timetable for selling RBS, after his Conservative Party won May's UK national election with a surprise majority, giving his party more power in government.
He has lost no time since then in pressing on with his plans for Britain's economy, including the sale of more shares in Lloyds Banking Group and a budget that included a shift away from welfare spending to higher wages for workers.
UK Financial Investments (UKFI), the body that holds the government's stake, said it sold 630 million shares in a quick-fire sale to institutional investors after the market closed on Monday.
UKFI sold more shares than it had indicated on Monday, when it had announced plans to sell 600 million.
The 2.3% discount to RBS's closing price on Monday, at which the shares were sold, was also narrower than the 3.1% discount on the government's first sale of Lloyds shares in September 2013.
By 11:44 RBS shares were up 0.3% at 338.5p.
The RBS share sale was 2.4 times covered by investors, a person familiar with the matter said, adding about 48% were UK-based investors, 37% were from the United States and 15% were from elsewhere.
RBS CEO Ross McEwan said he was pleased the sell-down had begun, which he said reflected the progress the bank had made "to become a stronger, simpler and fairer bank".
RBS was briefly the world's biggest bank by assets, but it has more than halved its assets and the size of its investment bank and sold businesses around the world.
Britain also had to rescue Lloyds and has sold down its stake in that bank at a profit over the past two years and now holds less than 14%. The taxpayer could make at least £2bn on the Lloyds bailout.
The RBS sale was handled by Citigroup, Goldman Sachs , Morgan Stanley and UBS.
