By Matt Scuffham
LONDON (Reuters) - Britain is planning to sell half its stake in Royal Bank of Scotland (L:RBS), worth 16 billion pounds ($25 billion), within two years of a possible first sale in September, according to people with knowledge of government thinking.
Finance Minister George Osborne said last month he wanted to start selling the government's 32 billion pound stake in RBS in the coming months, with initial sales likely to result in a loss for taxpayers.
The aggressive plan for Britain's biggest ever privatisation means the shares will be sold at a faster rate than anticipated and makes it likely the government will make a substantial loss on the initial sales of its shares.
Final decisions on the sale process have yet to be made and progress will depend upon RBS's performance, ongoing investigations into past misconduct, and market conditions, the sources said.
Britain pumped 45.8 billion pounds into RBS to rescue it during the 2007-9 financial crisis, leaving it with a 78 percent stake, and is sitting on a loss of 14 billion pounds based on current share prices.
RBS Chairman Philip Hampton, who is leaving the bank later this year, said in June he expected it to take several years for the government to complete the sale while former Chief Executive Stephen Hester said it could take a decade.
Although Osborne had been reluctant to sell shares in RBS at a loss, the bank's improving performance has persuaded him now is the time to sell. A majority win for his Conservative party in a general election in May also means he has more political leeway to sell.