Royal Bank of Scotland chief executive officer Ross McEwan said he wants the UK bank to buy back shares to help reduce the government's stake. "I would rather participate as the government is selling down," McEwan, 58, told investors at a conference in London on Tuesday. "It's probably the best thing for all investors, where excess capital goes back through buybacks."

Chancellor George Osborne raised £2.1 billion selling the first portion of RBS shares in August, even though it came at a loss on Britain's bailout of the Edinburgh- based lender at the height of the financial crisis.

McEwan plans to return capital to shareholders from early 2017, using funds generated from asset disposals as the bank focuses on UK and Irish consumer lending.

McEwan said RBS could follow American International Group, which bought shares to help cut the US government’s stake after requiring a bailout in 2008. The UK owns 72.9 per cent of RBS.

"You've seen very good examples of that in the marketplace," McEwan said. "AIG did the same, where the government sold out, and that worked very successfully for all parties."

RBS shares gained as much as 1.9 per cent as other major UK lenders declined. The stock was up 0.6 per cent to 311.3 pence at 10:45 a.m. in London trading for a loss of 21 per cent this year.

The CEO said RBS is on-course to reduce costs by about £850 million in 2015. That would exceed a target given in July by £50 million because of the bank levy, according to McEwan. The bank is “on-track to deliver” all of its targets and is making “great progress” reducing assets, he added.

Bloomberg