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UK chancellor Philip Hammond has for the first time put a March 2019 deadline on when the government will start selling its £24bn stake in Royal Bank of Scotland, despite currently sitting on a loss of more than £26bn.

The plan to start selling the government’s 71 per cent stake in RBS in the next 16 months comes less than one month after the bank said it was confident that it would settle a multibillion-dollar fine with US authorities this financial year for mis-selling mortgage securities.

Mr Hammond has previously said he would not begin selling RBS shares until the bank had agreed the size of an expected fine with the US Department of Justice, which some analysts estimate could be as high as $12bn.

The UK Treasury said in Wednesday’s Budget that it “intends to recommence the privatisation of RBS before the end of 2018-19 and to carry out over the forecast period a programme of sales expected to dispose of about £15bn worth of shares, which represents around two-thirds of our stake at current market prices”.

Unlike the sale of the government’s stake in Lloyds Banking Group — which the government completed this year at a slight profit to the taxpayer — the sale of the RBS stake is likely to leave the government nursing a heavy loss.

The independent Office for Budget Responsibility estimated on Wednesday that the government was sitting on a £26.2bn loss on its RBS stake, with an overall £21.8bn loss on all of its bank rescues since the financial crisis.

Shares in RBS have gained 30 per cent in the past year, rising to 271.6p per share on Wednesday afternoon. But they are still far below the average price of 502p per share that the government paid to bail the bank out after the 2008 financial crisis.

The shares are also currently below the 330p per share price at which George Osborne, the previous chancellor, sold the first tranche of shares in August 2015.

Ross McEwan, RBS chief executive, said last month: “We remain optimistic of reaching a final settlement this financial year,” noting that only a couple of banks remain in the queue to settle ahead of RBS.

Mr McEwan hopes that by quickly settling the US mis-selling case, RBS will be able to make its first annual profit in a decade next year, and resume paying a dividend.

The UK government said: “RBS has made significant progress on resolving its legacy issues and refocusing on serving British businesses and consumers.

“It remains the government’s objective to return the bank fully to the private sector when it represents value for money to do so and market conditions allow.”

RBS faces a crucial test next week when the Bank of England will publish the results of its annual stress tests of the country’s biggest lenders. Last year, RBS was one of three banks that failed some elements of the test, dragged down by the expected cost of the US mis-selling fine.

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