Philip Hammond admits RBS stake may be sold at a loss

The UK chancellor has admitted for the first time that the government was prepared to sell its stake in Royal Bank of Scotland (RBS) at a loss.

The lender has received a £45-billion bailout for a 72-per cent stake, at 502 pence a share, at the height of the financial crisis in 2008.

Shares in the loss-making lender were now trading at less than half that price at 223 pence.

Philip Hammond told MPs yesterday, "We have to live in the real world."

He added, "Our policy remains to return the bank to private hands as soon as we can achieve fair value for the shares, recognising that fair value could well be below what the previous government paid for them.

"We have to live in the real world and make decisions on the future of our holding in RBS in the best interests of taxpayers."

Hammond had earlier ruled out offloading of government stake in RBS until after 2020.

He added: "We are making real progress in realising our holdings in the banking sector.

"We continue the programme sale of our shareholding in Lloyds, which is now down from 43 per cent to less than 2 per cent, and just last month we sold £12 billion worth of  Bradford & Bingley mortgages in a highly competitive process."

Meanwhile, shares in the bank, which had reported nine annual losses in a row, since its rescue by the taxpayer were trading at about 224 pence. Hammond's predecessor George Osborne had sold a 5-per cent stake in 2015 at 330 pence a share – a £1 billion loss.

Hammond said the government was not at present actively marketing its stake in RBS.