City big guns warn it may take five years to clear bank bail-out TOP City figures warned MPs yesterday it will take at least five years for taxpayers to break even on the £64 billion state bail-out of Royal Bank of Scotland and Lloyds Banking Group. The Treasury select committee also heard predictions that selling down the holdings may be done in up to ten stages. The MPs were told the continuing taxpayer shareholdings were a depressant on RBS and Lloyds's share prices, with the "politicisation" of RBS, including the row over chief executive Stephen Hester's bonus, continuing to trouble would-be institutional investors. Adam Young, co-head of equity advisory at Rothschild, also said there were "unknowables" involved in offloading the taxpayers" 82 per cent stake in RBS and 40 per cent in Lloyds. These included the future state of the economy, the eurozone's problems and the banking regulatory climate. Asked by Labour Co-operative MP Andy Love if 2015 was a realistic deadline for the shares sale, Young said: "I think that's a low probability event. I think it will take more than five years. Keith Skeoch, head of Standard Life Investments, said that in "five years plus" there was "every chance" that the restored RBS and Lloyds would yield a profit for the taxpayer on their stakes, a view shared by Robert Talbut, chairman of the influential Association of British Insurers, and Richard Buxton, head of UK equities at Schroders. MPs were told that the government may decide to sell shares at a loss initially as long as it got value from the full disposal programme over a period of years. This echoed the view expressed at an earlier meeting of the committee by Jim O'Neil, head of UK Financial Investments, the semi-quango that monitors taxpayer stakes in banks. Young said his experience was that big shareholdings sold down in tranches were seldom of over £5bn each, leading SNP Treasury spokesman Stewart Hosie to remark: "That implies ten tranches [of share sales]." The City witnesses praised RBS chief executive Hester for doing a "very impressive" job in turning RBS around, but objected to the criticism levelled at the bank's boss. They said the use of the Royal in particular as a political lightning rod was counter-productive in restoring the interest of institutional investors in investing in the company. Young said if Hester decided to quit RBS "it would be a real challenge to replace him. The perception [in the City] is there would be a struggle to replace him given the pressures that forced him out. Talbut added: "The company is still susceptible to being seen as a political football when times get tough or difficult decisions are being reached." He cited restructuring and redundancies. Amid rumours that the government had held talks over the sale of part of its holding in RBS to the Abu Dhabi sovereign wealth fund, Talbut said the ABI would be unhappy if there was any "sweetheart deal" offering preferential share terms to a single investor. Last night the taxpayer was sitting on losses of a combined £35bn on its stakes in the two banks.