UK should not delay too long on RBS sale: Hester

Britain should not delay too long kick-starting the sale of its shares in Royal Bank of Scotland , the chief executive of RBS said, as speculation grows that the government could sell an initial stake at a loss.

The faster the government starts selling its stake, the better for everyone, RBS CEO Stephen Hester told Reuters on Thursday.

Hester, speaking on the sidelines of a conference organized by the British Chambers of Commerce, reiterated that the sale of Britain's RBS stake remained ultimately a matter for the government.

The government have got to decide when to sell and at what price, he said.

Britain owns around 82 percent of RBS after bailing out the bank with around 45 billion pounds ($70.6 billion) of taxpayers' money during the 2008 credit crisis.

The average price at which the taxpayer acquired its stake in RBS was 49.90 pence, and RBS shares have traded stubbornly below that price, meaning British taxpayers are billions of pounds out of pocket.

Britain also wants to sell its 40 percent stake in Lloyds , the other major UK bank which was part-nationalized after a 20 billion pound state rescue in 2008, but a full disposal of its takes in both banks could be years away.

Those stakes are managed by the government's UKFI body, which this week signaled that an initial sale of RBS shares could take place sooner than expected, even though this would lead to a loss for the taxpayer.

The possibility of an early sell-down does not surprise us, Oriel Securities said in a research note.

We do not agree with the view that the start of a sell-down creates a stock overhang. The start of the sell-down technically reduces the overhang but more significantly it should reflect UKFI's assessment of a more stable environment for banking shares and a normalized market for trading banks' shares, it added.

Manus Costello, an analyst at Autonomous Research in London, also said it made political sense for the government to sell an initial RBS stake at a loss.

The government must recognize that it is better to sell RBS for less than its 'in price' of 50p because the political cost of carrying it is now too high, he said.

RBS shares closed down 0.3 percent at 26.47 pence - leaving taxpayers sitting on a loss of some 20 billion pounds on their RBS stake.

($1 = 0.6376 British pounds)

(Reporting by Sudip Kar-Gupta; Editing by Adrian Croft and Sophie Walker)