Government may start sale of RBS stake in 2011, says chief executive

The government could sanction selling part of Royal Bank of Scotland (RBS) as early as next year as the bank moves to complete an overhaul of its business, according to its chief executive, Stephen Hester. In an interview with the German newspaper Welt am Sonntag, Hester said he would be "disappointed" if in 2011 ministers did not begin the process of selling down the government's 83% stake in RBS that it acquired as part of a wider bank rescue plan. He added that the sale "won't be conducted in one go". RBS is still nursing its wounds after it was caught up in the financial crisis, but it beat expectations with a return to profit in the first three months of the year. It is reversing a decade-long global expansion drive and has raised more than $2.5bn (£1.64bn) from exiting or selling more than 20 businesses in the last 14 months. Its share price closed at 40p last week, up from 12.1p at the start of last year. The bank will leave all sectors, such as global retail banking, in which it cannot establish itself among the market leaders, Hester told the paper. It is also selling some of the parts of Dutch Bank ABN Amro it bought in 2007, as the takeover was "clearly a big mistake", he said. The strategy of the bank is paying off and it has gained new leeway to act, Hester said. The government has yet to articulate a clear strategy for exiting the bank stakes acquired under Labour. RBS along with other banks has come in for criticism from politicians for a failure to increase commercial and mortgage lending. Despite reforms to the sector that force banks to hold more capital and adopt a more conservative lending regime, ministers have consistently argued banks need to lend more. Hester said introducing stricter rules for loans in the wake of the downturn was the right thing to do, but it means that fewer firms get loans and that prices for borrowers are rising. "That's the price for a stable economy," he said. RBS has revised upwards the size of the loans and unwanted businesses it will have at the end of 2012 by £20bn to £40bn. The non-core division, set up by Hester to dispose of businesses that the bailed-out bank no longer wants, started out with £252bn of third-party assets to wind down following the injection of taxpayer money in October 2008. The run-down of risk in the division, which employs about 14,000 staff in a variety of businesses up for sale and being run off, is crucial in helping Hester achieve his goal of ensuring RBS has a double-A credit rating by 2013.