The UK government owns over 80% of RBS after it bailed out the lender to the tune of £45 billion in 2008, and there has been speculation that the government might try to sell off the bank before the next general election as a way of raising money for the exchequer. Westminster must find a balance between nursing the bank back to health without becoming a market speculator itself. Over the weekend, UK business secretary Vince Cable stated it would be ‘pretty unrealistic’ to expect that RBS would be privatised before the election in 2015. Mr Cable confirmed it could be another five years before the government unloads its position in the lender.
On one hand, the government’s majority stake in the bank has capped the company’s share price growth, as the firm pursued asset-stripping of non-core businesses and a lower-risk strategy. On the other hand, the government stake has given investors a sense of security. If there are any further comments from other government ministers about the possibility of privatisation, we could see the share price rally.