LONDON (Reuters) - The government has not set a timetable or revenue targets for the sale of its multi-billion pound stakes in Britain’s banks, reducing the risk of a sell-off that does not offer best value for the taxpayer, an official at the body managing the holdings said.
John Crompton, head of market investments at UK Financial Investments (UKFI), said there were no targets along the lines of those set by Margaret Thatcher’s government at the height of the privatisation spree that began in the 1980s — the last comparable mass sale of UK government holdings.
“We are not acting under direction regarding the price at which we can sell or the rate at which we should sell. Unlike the position 25 years ago, the Treasury is very cautious about assuming proceeds from transactions which are inherently uncertain in making projections for public finances,” he told a conference organised by IFR, a Thomson Reuters publication.
“There are no projections, no assumptions, and hence no targets to hit. This greatly reduces the risk of our undertaking transactions which do not represent best value for the taxpayer,” he said on Tuesday in a rare public appearance.
Crompton’s comments are likely to go some way to ease industry speculation of pressure from the current Labour government on UKFI to at least begin the disposal process ahead of a general election, due by next June — possibly before markets fully stabilise.
UKFI, set up last December, handles Britain’s 70 percent stake in Royal Bank of Scotland and its 43 percent holding in Lloyds Banking Group, which it got after pumping 37 billion pounds into the lenders.
Crompton, a former Morgan Stanley and Merrill Lynch banker, said UKFI aimed for an “orderly disposal” of its holdings in the UK banks, currently worth around 80 billion pounds, adding that would involve a string of transactions over time.
“Ultimately, our exit will depend on market receptivity, on the size and frequency of deals, on the rate of change in the value of what we own,” he said. A rapid rise in the value of the bank shares as markets improve could mean even more deals to gradually reduce the government’s stakes — particularly as institutional placings rarely exceed three billion pounds.
UKFI has not excluded sales to strategic investors, and Crompton indicated on Tuesday that no option was ruled out, though capital markets — and innovations as the recovery continues — will hold the key to its fortunes.
“We are open to any sale approach, and we see the most likely route as via capital market sales,” he said.
“We will need to innovate, to be imaginative in our approach and to use the full range of sales methods available to us.”
Industry bankers say UKFI is expected to test the waters in the coming months with a small offering of bank shares, potentially a straightforward institutional placement that will not require a time-consuming prospectus, and could then follow with larger stake sales and even a retail offering.
Earlier this summer, newspapers reported the UKFI was considering issuing convertible bonds as a way of beginning its exit and securing an exchange into banks’ shares at the government’s average acquisition price.
The opposition Conservative party, meanwhile — should they come to power in 2010 — are reported to be considering a return to the privatisation tactics of the 1980s with a mass retail offering reminiscent of the “Don’t forget to tell Sid” campaign to involve Britain’s everyman in British Gas’s 1986 sale.
UKFI, described by its former boss Glen Moreno as a “Fidelity with nuclear weapons” will also manage fully-nationalised bank Northern Rock and failed mortgage lender Bradford & Bingley’s loan book, pending European approval.
Reporting by Clara Ferreira-Marques and Steve Slater; Editing by Jon Loades-Carter