Talks to sell a stake in Britain’s state-owned Royal Bank of Scotland are being held at the level of the Abu Dhabi ruling family, a source close to the emirate’s rulers and a banking source said on Tuesday.
“Abu Dhabi is always talking to parties to invest, including RBS. Whether it will materialise or not is too early to say,” said the source close to the royal family, speaking on condition of anonymity. “We have to wait and see.”
The BBC reported on Monday that Britain could sell as much as a third of RBS to Abu Dhabi wealth funds, but at RBS’s current share price a deal could leave British taxpayers nursing billions of pounds of losses.
A senior banker told Reuters that the oil-rich emirate’s sovereign wealth funds were not involved in talks at this stage.
“It’s happening higher up,” he said, adding that a deal was some distance from being struck and could fall apart on price grounds. Two other banking sources also said that a deal, if it happened, would be struck at a government-to-government level.
An Abu Dhabi government official declined to comment.
Shares in RBS, in which the British government took an 83-per-cent stake during the 2008 credit crisis, rose 4.6 per cent in early trade to 29 pence, making them the top gainers on the blue chip FTSE benchmark, which was up 0.2 per cent.
The shares are still a long way short of the average price of 49.9 pence the government paid for its stake.
The senior banker said he did not expect a stake to be sold at a price higher than the market level.
He said the Abu Dhabi royals were being advised by an individual, but did not name the person. In the past, the royal family has engaged high-profile British banker Amanda Staveley.
In 2008 Ms. Staveley played a prominent role in the family’s investment of £3.5-billion in another British bank, Barclays.
Ms. Staveley’s firm, PCP Capital Partners, acted for Sheikh Mansour Bin Zayed al-Nahayan, a younger brother of United Arab Emirates ruler Sheikh Khalifa bin Zayed al-Nahayan. Staveley was also involved in the sale of Manchester City football club to Sheikh Mansour.
Abu Dhabi made about £3-billion after investing in Barclays during the financial crisis, in a complex deal that helped the bank avoid a state bailout.
RBS CEO Stephen Hester is three years into a five-year turnaround plan that he has dubbed the biggest-ever bank restructuring.
RBS lost £2-billion last year, its fourth straight annual loss, pushing back the time it is expected to deliver returns for investors.
That renewed calls for Britain to consider kick-starting the sale of the stake at a loss to cut growing political interference - mostly on lending and pay - and boost the appeal of the bank for private investors.
“We will start returning the stake to the private sector when it offers value for money to the taxpayer,” a British Treasury official told the Financial Times on Monday. “The share price is not near that now.”
Britain also holds a 41 per cent stake in Lloyds Banking Group. It is sitting on a £10-billion loss on that £20-billion rescue.