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It was not exactly a propitious start. On Friday, Royal Bank of Scotland chairman Sir Philip Hampton said he wanted the government to be able to sell down its 82 per cent stake in the bank from the middle of next year. There is no firm date, but the move represents progress and suggests that the government's decision on when to sell might eventually be dictated by something other than the price at which it bought. It took the RBS stake to avert the consequences of its collapse, not to make a profit on trading the shares. With the main aim now achieved, there seems little point in waiting for the shares to reach the in-price of 500 pence ($0.79). That might, after all, never happen. Aside from that, it was all bad news as weak first quarter numbers pushed RBS shares down 4 per cent to 294 pence.
But can the government really start selling its £15-billion of RBS shares a year from now? The bank is in a healthier position than it was a year or two ago. Non-core loans are now 11 per cent of the total, against 20 per cent at the same stage in 2011. But there is still a lot to do. The first group of jobs might be grouped under the heading "structural." Here, the tasks include: finding capital to satisfy new regulatory demands, which could come to £6-billion; buying out the government's dividend access share, which effectively blocks dividends and could cost up to £2-billion; converting the government's B-shares into ordinary shares; and making progress on branch sales and the flotation of Citizens, its U.S. business. So plenty to keep the lawyers busy. But at least this all looks achievable.
What looks harder is the job of convincing potential buyers that RBS is a good investment. This is where the weak numbers make life tough. The investment bank was grim, with operating profits down 64 per cent as the business continues to shrink. And this was in a traditionally strong quarter. Profits were also down by a quarter in the corporate business and flat in retail. By next summer, RBS will have to demonstrate stability in all three areas. If there is a silver lining to Friday's numbers it is that they provide a fairly low base from which to compare the figures for the first quarter of 2014, making the potential sales pitch that little bit easier.