RBS nets £630m after Direct Line stake sale

RBS was ordered by European regulators to sell all of Direct Line – also one of Britain’s biggest home and general insurers – before the end of 2014, as a penalty for its 2008 taxpayer bailout which left it 81 per cent-owned by the government.

“This successful sale keeps RBS fully on track to meet its obligation to divest its stake in Direct Line by end-2014,” said RBS’s finance director Bruce Van Saun.

The sale was made at 210p a share, a 3.7 per cent discount to Direct Line’s closing price on Thursday and leaves RBS holding 427.4 million shares, a 28.5 per cent stake.

A banking source close to the transaction said it was “comfortably covered” and priced at the top of a 208p to 210p range with demand for the shares exceeding the amount being sold within an hour of the sale being announced.

RBS sold just over a third of its interest when it floated Direct Line last October and it cut its stake just below 50 per cent with a share sale in March.

At that time it agreed not to sell any more shares until early September.

RBS said it does not plan to sell any more shares in Direct Line for at least 90 days.

It said the proceeds from the sale would be used for general corporate purposes.

Direct Line has brands including Green Flag and Privilege and insures almost one in five UK cars.

Despite suffering in the first six months of the year from a near-10 per cent annual fall in premium rates, it saw pre-tax profits soar by 96 per cent to £208.8m, after a flood and storm-hit 2012.

It recently emerged that around 2,000 jobs are under threat at the insurer, up to a quarter of them at three offices in Leeds.