State-backed Royal Bank of Scotland wants to slash the number of shares it has in issue to reduce price volatility and enable a more consistent valuation of the bank.

RBS, which is 82 percent owned by the British government after being rescued during the 2008 financial crisis, plans to give shareholders one new ordinary share for every 10 shares they currently hold.

The company currently has a very large number of issued ordinary shares and at the current level small absolute movements in the share price result in large percentage movements resulting in considerable volatility, RBS said in a letter to shareholders on Tuesday.

It said a sub-division and consolidation of shares would result in a share price more appropriate for a company of RBS's size, which could cut volatility and enable a more consistent valuation of the company.

Shares in RBS closed on Tuesday at 23.3 pence, below their nominal value of 25p. Its market capitalisation is 13.7 billion pounds, down 60 percent over the last two years.

The consolidation would theoretically result in the new shares being worth 233 pence each, based on Tuesday's closing price. The new shares would carry a nominal value of 100p.

The government, which holds around 39.6 billion RBS shares, would be left with a holding of about 3.96 billion shares. The proportion of its holding would remain unchanged.

Shareholder need to vote on the plans on May 30. The last day of trading for the existing shares would be June 1.

(Reporting by Matt Scuffham; Editing by David Holmes)