Britain's UKFI to stay mum on bank stakes -sources

By Myles Neligan and Douwe Miedema

LONDON, July 13 (Reuters) - The body managing the UK's stakes in two of its biggest banks is expected to maintain its low profile when publishing its first annual report on Monday and will say little on how to limit a potential multi-billion pound taxpayer loss on the stakes.

UK Financial Investments (UKFI) -- run from a small set of offices in the Treasury -- aims to keep out of the headlines in publishing the report, two sources familiar with the report told Reuters.

"It doesn't say anything that they haven't already said in less detail," one of the sources said.

John Kingman, a former Treasury official who now works with former investment bankers as head of UKFI, will explain how he manages a 70-percent stake in Royal Bank of Scotland and 43.3-percent in Lloyds Banking Group (LLOY.L).

Kingman, who was also a journalist, got off to a rocky start with politicians when a hearing in March said it was "scandalous" that he had failed to provide details of executive pay at the banks the UKFI holds stakes in.

UKFI -- a company described by its chairman Glen Moreno as a "Fidelity with nuclear weapons" in a reference to the large U.S. fund manager -- was set up in December to manage the stakes in the two banks after a 37 billion pounds ($60 billion) bail-out.

Kingman has tried to distance the group from politicians, saying it will operate like any other engaged shareholder to maximise the value of its holding, and that it plans to sell down its holdings over time in an orderly way.

According to Reuters calculations the average purchase price for RBS shares was about 51 pence, compared with the bank's current market price of about 36.3 pence.

For Lloyds, the purchase price was about 120 pence, including "B" shares, against a current price of 64 pence.

That means British taxpayers may be facing a loss of well over 10 bilion pounds on the government's holdings if they were sold at the current market rates.

At the Treasury Kingman had been in control of 600 billion pounds of public spending annually and led talks with RBS, Lloyds TSB and HBOS on their recapitalisation, and on the nationalisation of Northern Rock. ($1=.6172 pounds) (Additional reporting by Steve Slater)