Philip Hammond says taxpayer stake in RBS may be sold at a loss

Chancellor Philip Hammond has admitted that the government could sell its stake in Royal Bank of Scotland (RBS) at a loss.

Hammond told MPs that the government remains committed to returning the taxpayers' 72% stake in the lender to private hands as soon as "fair value" is achieved.

But he warned that that fair value could be less than what the previous government paid to acquire the stake in 2008.

"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," the chancellor was quoted as saying by the Herald newspaper.

"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."

The government spent £45bn ($58bn) to buy a majority stake in RBS — at 502p a share — during the height of the financial crisis.

The lender has reported nine consecutive years of losses since the bailout and its current share price is at 223p — less than half what taxpayers paid in 2008.

RBS chief executive Ross McEwan has said the bank would return to profit in 2018 and announced a £2bn cost-cutting plan in February.

The government has progressively wound down its ownership of Lloyds bank, with taxpayers' stake in the lender cut to 2% from 43% in 2009.

In February, the Treasury said it expected to receive £11.8bn from a sale of Bradford & Bingley loans acquired during the 2008 financial crisis.

The sale — to insurer Prudential and funds managed by Blackstone — was part of an effort to recoup taxpayer money that was spent to bailout banks in the midst of the financial crisis.

"We are making real progress in realising our holdings in the banking sector," Hammond was quoted as saying by the BBC.

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