Banking group cuts stake to meet terms of bailout

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Royal Bank of Scotland (RBS) is set to sell more of its holding in Direct Line.

The sale, which expects to raise about £630m for the bank, will also reduce its stake in Direct Line to less than 30%.

The banking group is being forced to dispose of all Direct Line shares by the end of next year to comply with state aid rules following the government bailout of the lender in 2008.

After the market closed on Thursday, RBS began taking orders from institutional investors to sell an 18.2% stake in the FTSE 250 company.

The placing is expected to cut the bank’s stake from 48.5% to 28.5%.

It will sell another 1.8% chunk subject to demand, the Financial Times reports.

The shares, which were priced at 175p in the flotation last October, have overcome concerns about competitive pressures in the UK motor insurance market.

It is almost a year since RBS listed the UK home and motor insurance company on the stock market.

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