“Investors cautious” over Royal Bank of Scotland offering

Otmane El Rhazi from Mindful Money » Shares.

As the chancellor George Osborne announces the sale of the government’s stake in RBS, Graham Spooner, investment research analyst at The Share Centre, looks what it may mean for investors… 

George Osborne has confirmed in his Mansion House speech that the government will start selling off its holding in RBS. This comes on the back of recent sales of Royal Mail and Lloyds. The sale is set to start in the near future, but it is likely to happen in tranches over a number of years and will not initially involve the man on the street. The current value of the government’s holding is £32.1bn.

Mr. Osborne has said that “from bailing out the banks to bringing them back from the brink, now is the time for RBS to rebuild itself as a commercial bank no longer reliant on the state, but serving the working people of Britain”. Potential investors may see this move as symbolic of the country moving on and away from the past financial crisis.

It appears that the government feels the shares will be better off in the hands of investors. However, the sale is expected to a difficult one, as the bank is still on the road to recovery and has reported seven years of losses since the bail out. We remain cautious on RBS and believe there are better opportunities for followers of the banking sector, such as HSBC which we currently recommend as a ‘buy’ for lower risk investors looking to achieve income.