The 2009 UKFI annual report has revealed that paper losses in Government bank shares have reduced from £18.14bn in February to £10.92bn in June.
UKFI currently owns 70 per cent of RBS and 43 per cent of Lloyds Banking Group after investing £15.3bn and £8.3bn in the banks respectively.
The report admits it will be a challenge to sell the stakes in the banks. It says: “The circumstances under which we are likely to be able to sell shares are likely to be those in which the economy – and investor confidence – is recovering, and in which bank share prices have performed robustly.
“It is in our view too early to make a judgement that the conditions are right for a share sale.”
UKFI also revealed it would be increasing its team from 11 to 15 as it incorporates a wholly-owned investments team to manage Government investments in Northern Rock and Bradford & Bingley.
UKFI acting chairman Glen Moreno says: “Our task will not be easy. Our investee banks face significant legacy losses and the inevitable effects of the recession. Nevertheless, we believe they now have the capital resources to weather these difficulties and to emerge from the current environment with their strong franchises and profitability intact.”
Moreno says returning the banks to full privatisation will be “challenging” as the amounts involved are very large, and the process will take time and patience.
He says: “We all have a stake in UKFI’s success. Skilled disposal of these investments will recoup tens of billions of pounds for the taxpayer. At UKFI, we understand the importance of this challenge.”