Banks will earn less than £20m from the deal

Banks handling Direct Line Group’s (DLG) flotation will charge a lower fee than normal to encourage further initial public offerings (IPOs).

The Financial Times reports that the 12 banks involved will earn less than £20m from selling the first batch of DLG shares.

RBS is expected to pay the banks 1.75% of the cash raised from the launch, with an extra 0.75% fee if the banks meet private targets.

This is below the 2.74% weighted average for a London equity offering in the past five years, according to Bloomberg figures.

The Financial Times said investors had complained that banks’ IPO fees are excessive, leading to a lack of big IPOs.

Goldman Sachs and Morgan Stanley are the main banks involved, with UBS also playing a key role.