LONDON - The British government’s long-awaited sale of its stakes in Royal Bank of Scotland and Lloyds Banking Group is inching closer.
U.K. Financial Investments, the organization that manages the holdings on behalf of the British government, has asked investment banks to make their pitches to help sell the stakes in the two lenders, which both received multibillion-dollar bailouts during the financial crisis.
The tender offer, released on Thursday, comes as the future of the government’s holding in both R.B.S. and Lloyds is at crossroads.
Both banks have shed billions of dollars of assets, reduced their exposure to risky assets and, in the case of R.B.S., slashed its investment banking unit to refocus on its retail operations. British taxpayers currently own a 39 percent stake in Lloyds and a 82 percent holding in R.B.S.
Earlier this month, George Osborne, the country’s chancellor of the Exchequer, said the government was “actively considering options for share sales in Lloyds,†though he played down a similar offloading of R.B.S. shares. Other local lawmakers also have called for the breakup of R.B.S. to separate the firm’s toxic assets from its healthy banking operations.
By inviting investment banks to help sell the British taxpayers’ stakes in the two lenders, U.K. Financial Investment! s has moved the ball forward on the privatizations, though questions remain over how long the eventually share sale will take.
The tender, for which pitches must be submitted by July 8, asks investment banks to apply for four roles in the pending process: bookrunner, co-lead manager, capital markets adviser and financial adviser. Last year, Deutsche Bank helped U.K. Financial Investments to sell its stake in struggling British lender Northern Rock to Richard Branson’s Virgin Money.
The potential privatizations of both Lloyds and R.B.S. are likely to be highly contentious, as local politicians and analysts continue to battle over what to do with British taxpayers’ takes. Some British lawmakers have called for the shares to be sold directly to retail customers to allow them to benefit from any potential increase in the firms’ future share prices. A similar process in the 1980’s led many British taxpayers to buy shares in former state-owned companies like the energy utility British Gas.
Lloyds is likely to be the first to be privatized, as its current share price is above the government’s 61.20 pence (93 cents) breakeven price. Shares in R.B.S., however, are still trading 33 percent below what the British government says it needs to recoup its investment.
On Friday, Lloyds’ shares rose 1.6 percent, to 63.88 pence, in early afternoon trading in London, while R.B.S.’s stock price traded up slightly.
The prospect of the British government selling its stake in R.B.S. took a hit earlier this month when its chief executive, Stephen Hester, abruptly announced that he ! would lea! ve the bank by the end of the year.
Mr. Hester had been widely praised for overseeing R.B.S.’s restructuring, though the timing of any potential share sale had become highly politicized ahead of Britain’s general election to be held in 2015.
The bank’s board said they had asked Mr. Hester to step down so that they could appoint a new leader to oversee the privatization process, which could take the rest of the decade to complete.
