RBS expected to raise £1.1bn as it accelerates sale of its remaining stake in Direct Line
Royal Bank of Scotland is selling its remaining stake in insurer Direct Line, almost a year earlier than many in the City had expected.
The state-backed lender said its 28.2 per cent interest in the insurer – or 423.2million shares – will be sold to institutional investors such as pension funds.
RBS yesterday started an ‘accelerated book-build’, meaning confirmation of the completed sale is expected today.
Good time to sell? Direct Line revealed its pre-tax profits increased 70 per cent last year to £423.9million
Based on last night’s share price this is expected to raise around £1.1billion, helping to plug a shortfall in RBS’s capital.
The process kicked off hours after Direct Line revealed its pre-tax profits increased 70 per cent last year to £423.9million.
Insiders at RBS described the move as ‘opportunistic’ given the insurer’s strong performance and share price.
RBS was forced by the EU to offload Direct Line, whose brands include Churchill, Privilege and the Green Flag, as a condition of its £45.5billion bail out during the financial crisis.
The deadline for completing this falls at the end of the year. The bank is today set to confirm it slumped to a loss of about £8billion last year, but will still pay around £550million in bonuses to staff.
Yesterday Direct Line said it expects to rack up a claims bill of between £70million and £90million from customers affected by the recent floods. It will pay a final dividend of 8.4p per share, 5 per cent higher than last year.
There will also be a special dividend of 4p per share, taking total dividends for 2013 to 20.6p per share. Shares rose 2p to 263p.
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