Lawmakers in Britain yesterday challenged public officials over whether they had allowed more than £2bn (€2.73bn) of government shares in Royal Bank of Scotland — the owner of Ulster Bank — to be sold too cheaply last month.
Officials and politicians here will likely be keeping a close eye on the experience of bank sales in Britain as the Government prepares to start selling a stake in AIB, probably next year.
As global share prices started to come off their highs in early August, the British government sold 5% of RBS at a price worth a third less than it paid when it rescued the bank with £46bn of UK public money at the peak of the 2007 to 2009 financial crisis.
Large investors were offered shares in RBS for 330p each, far below the 502p the government paid and a market price of more than 400p a share reached earlier in 2015.
Speaking to the British parliament’s Treasury Committee, the chairman of UK Financial Investments (UKFI), the public body that advises finance minister George Osborne on share sales, said he was confident the public had received good value.
“I don’t think it was cheap. On our valuation analysis it wasn’t cheap, nor was it cheap compared to the market price on the day,” said UKFI chairman James Leigh-Pemberton.
RBS’s share price was depressed because it was an illiquid stock in which the government had held a 78% stake, he said.
Future sales should attract a wider range of investors, potentially willing to pay a higher price, he added.
Another UKFI official, Oliver Holbourn, said stock markets in the US and Europe were close to record highs when Mr Osborne decided to sell the shares, and that it was wrong to assume that delaying a sale would have led to a higher price.
The banks handling the sale — Citigroup, Goldman Sachs, Morgan Stanley and UBS — received just £1 each in payment, UKFI said.
Lawmakers said these banks did not typically work for such low fees, and questioned their true motivation.
UKFI said the prestige of running a large British government share sale and the ability to market shares of interest to a wide range of potential clients was sufficient incentive for the banks, and that the banks received no other financial benefit.
Reuters and Irish Examiner staff
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