George Osborne
George Osborne said in his Summer Budget that the government expected to raise at least £2bn in 2015-16 from selling down its 79% stake in RBSGetty

Last night's disposal of Royal Bank of Scotland shares at 330p by Chancellor George Osborne achieved a new 2015 low.

Leaving aside castigation about the price the government paid for RBS six or seven years ago, questions can be asked about the timing of this sale.

The big game-changer in this respect was the announcement at RBS's Q2 results last week about the speeded up streamlining of the group, specifically the disposal of Citizens Financial Group and the rationalisation of what's left of corporate and institutional banking.

The removal of risk weighted assets (RWAs) upon a complete sale of Citizens, and the freeing up of capital no longer required to support the scaled back group, translates to a predicted common equity tier 1 (CET1) ratio of 15.5% at 2015 year-end, and 17.5% in 2016.

The removal of RWAs and sale of Citizens also ties in with management's time line for resolution of the most material pieces of conduct provisions.

The decision to proceed with a sale at 330p appears to have been taken in isolation of these developments.

If the decision to sell is agnostic to the potential for capital surplus then why didn't the sale begin back in February 2015, when RBS shares were trading some 20% higher than they are today.

Ian Gordon, senior banking analyst at Investec, told IBTimes: "To be clear, I think RBS remains loss making in 2015 on a reported basis. I expect it to return to modest levels of profitability in 2016.

"But the game changer is the rationalisation of the group which is already in train, specifically the disposal of Citizens Financial Group.

"So it's not a surplus capital expectation based on a return to profitability and earnings retention, it's driven by shrinking the group.

Gordon sees a "disconnect" between the rationale of today's sell down whereas UK Financial Investments, which handles the government stake, has elsewhere articulated capital returns as integral to the RBS journey and the repatriation of the government stake to private ownership.

There was no reference to the fact the government chose not to sell down at 400p six months ago, and no reference to the argument, right or wrong, that the share price has strong scope for appreciation over the next six months, noted Gordon.

He said: "My view of RBS back in February was I thought it was mispriced in that its value then was overstated. Back then I thought we didn't have visibility of an emerging capital surplus.

"It was not the plan to sell down Citizens in 2015; it was not the plan to take out two thirds of the risk-weighted assets from corporate and institutional banking. Those were decisions that were taken after that.

"So back when we didn't have a capital returns story, at least not one that was obvious to me, the shares were trading 20% higher than they are today and the government for whatever reason didn't deem that an appropriate time to sell down.

"I don't have a very bullish view on the earnings output for RBS over the next 2-3 years, I just have the view that the scale of the capital surplus is so great that it fundamentally changes the arithmetic.

He added that the emerging capital surplus "very conveniently provides a simple mechanism for removing a large piece of the government's stake without having to concern ourselves about market capacity".