Britain to start sale of Lloyds soon, review RBS split

LONDON, June 19 Wed Jun 19, 2013 3:45pm EDT

LONDON, June 19 (Reuters) - Britain is ready to start selling its shares in Lloyds Banking Group and will examine whether to break up Royal Bank of Scotland (RBS) , Finance Minister George Osborne said on Wednesday.

The government is keen to show Britain's part-nationalised banks are recovering from the 2008 financial crisis. A sale of part of its 39 percent stake in Lloyds, at a profit, would allow it to claim at least partial success.

Osborne said the government is considering options for selling shares in Lloyds. He said the first sale would likely be to institutional investors such as pension funds, but he would consider all options for subsequent sales, including selling shares to the public.

"Nothing better signals Britain's move from rescue to recovery than the fact that we can start to plan for our exit from government share ownership of our biggest banks," Osborne said in his annual speech to financiers in the City of London.

The government pumped a combined 66 billion pounds ($103 billion) into the banks to keep them afloat during the 2008 financial crisis, leaving it with an 81 percent shareholding in RBS and a 39 percent stake in Lloyds.

A sale of shares in Lloyds has been seen as more realistic than an RBS sale as its shares are already trading above the government's break-even price of 61.2 pence, having been the top performer in the FTSE-100 last year. In contrast, the taxpayer is still sitting on a loss of nearly 10 billion pounds on the government's investment in RBS.

Osborne said a sale of RBS shares remained some way off. In the meantime, he said the government would urgently investigate the case for hiving off its soured property loans into a 'bad bank', leaving the remaining 'good bank' better able to lend to British households and businesses.

A decision on whether or not to split RBS will be made this autumn after the review has been completed. Osborne said he would not consider a "good bank/bad bank" split if it meant a further injection of capital or a larger government stake.

Osborne previously had rejected the idea of breaking up RBS, saying it would be too expensive.

However, the Parliamentary Commission on Banking Standards, which he set up last year to examine the industry, said on Wednesday that the current state of RBS was creating problems for banking competition and for the British economy.

"If the operational or legal obstacles are insuperable, the government should tell Parliament why," commission chairman Andrew Tyrie said.

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