Panel: U.K. sale of bank stakes 'cannot be a short-term game'

LONDON -- The body set up to manage the British government's stake in nationalized banks said Monday that returning the investments to the private sector will be "challenging" and could take years.

UK Financial Investments said the government's stakes in Royal Bank of Scotland and Lloyds Banking Group, which currently represent paper losses of 10.9 billion pounds ($17.5 billion), could be disposed of in several transactions "over a period of years."

UKFI declined to give more detail on a potential exit from the stakes in its annual report, saying it is not "possible or desirable" to say what price or time would trigger a sale.

"Our own task of returning these investments to the private sector is challenging," UKFI said. "The amounts involved are very large, and a successful disposal of our holdings will require professionalism and patience."

UKFI manages the 70% stake in RBS and the 43% holding in Lloyds that were picked up by taxpayers after the government bailed out the banks with a 37 billion pound ($60 billion) capital injection last year. The government also agreed to insure 585 billion pounds of toxic assets — risky securities for which there is no longer a market — held by the two banks.

UKFI Chief Executive John Kingman said that while the public "rightly expected" to get their money back, selling too early would mean a poorer deal for taxpayers.

"This will not and cannot be a short-term game," Kingman said.

UKFI said it will consider sales to major institutional investors, which can be organized relatively quickly, and sales to private shareholders, as well as selling bonds which can be transferred into shares in the two banks at a later date.

The annual report estimates that when including additional shares relating to the asset protection scheme — the taxpayer-backed insurance scheme for the banks' toxic debts — the value of the investments UKFI manages will rise to 60 billion pounds at current prices.