RBS To Be Fully Nationalised?

Published in Company Comment on 2 August 2012

Government mulls plans to buy out private shareholders.

According to the Financial Times, the UK government is having a pow-wow to consider buying out the remaining shares in Royal Bank of Scotland (LSE: RBS) that are still in private hands, with a view to boosting the bank's lending to businesses.

RBS is currently 82% owned by taxpayers, and the FT estimates that the acquisition of the remaining 18% would cost in the region of £5bn, in addition to the £45bn already invested in saving the bank.

The other bailed-out bank, Lloyds Banking Group (LSE: LLOY), is only under 41% government ownership, so pursuing all-out ownership of that one would be a good bit less realistic.

Forced lending

The problem is that the government's urging of banks to increase their lending to businesses, coupled with a lengthy programme of quantitative easing and the release of cheap cash to banks specifically for that purpose, has not achieved its targets, and smaller firms are still struggling to get the cash they need.

Forcing RBS to crank up its lending is seen by some as the only realistic alternative at the moment.

Chancellor George Osborne is reported to be opposed to a full buyout, as that would land taxpayers with 100% of the bank's debt liability, quite a bit of which is toxic -- but we're 82% in that soup already, so it's not likely to make a great deal of difference.

If the mooted plan does go ahead, there will surely be scrutiny from banking regulators -- a government-owned bank offering cheap loans could potentially raise some competition headaches.

We shall have to wait and see if the FT is right on this one.

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> Alan does not own any shares mentioned in this article.

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Comments

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closetspeculator 02 Aug 2012 , 1:47pm

Out of curiosity, is the Fool being payed to mention Woodford and/or Buffet in EVERY article they publish? If they are, fair enough (it's a revenue stream for a business I suppose). Otherwise, it's making every article look very daft (not to mention annoying) with the same tag lines at the end about Woodford and Buffet

SmudgeButt 02 Aug 2012 , 1:47pm

as the holder of a very tiny tiny number of RBS shares what's the prospect of a payout for these if the government decides to take it over completely?

tru2me 02 Aug 2012 , 3:25pm

Alan there are so many things to be considered by any owner of RBS?

http://www.digitallook.com/news/20272631/RBS_to_be_fined_300m_pounds_for_IT_mishap_mis-selling_scandals.html?&username=&ac=

From this I found this;

"Meanwhile, the provisions for compensating small businesses that were wrongfully sold expensive interest rate hedging products is thought to total £50m."

The above appears to suggest that RBS and probably other bank(s) seem to have penalised SME's, the very businesses the government wants them to support .

How do you extract corporate psychopaths from banks?

jaizan 02 Aug 2012 , 10:19pm

Governments don't know how to manage anything. That's because the process for choosing their leaders does not require the leader to have proven his management ability at many different levels, like you get in a good private sector company.

So the last thing they should do is nationalise RBS. We'll end up like the Soviet Union next.

OxonianCambion 03 Aug 2012 , 10:35am

That's because the process for choosing their leaders does not require the leader to have proven his management ability at many different levels, like you get in a good private sector company.

Hahaha! I can't tell if you are being serious or not... Look at what a mess the banks have got themselves and everyone else into!

As for the repeated links to Buffet and Woodford, surely it will be to give those particular guides (which are not bad articles) a good ranking in Google so people typing in the names above discover the fool site and get sucked in.

I just skip the paragraphs...

atilliator 14 Aug 2012 , 12:04am

I am with jaizan here.

The government managing a bank will make Fred Goodwin look competent by comparison.

As to lending money to businesses, one hears the tales of woe on the BBC, about how the bank didn't lend money to a business that would have been going places if only they had got what they asked for.

And it is nearly always a restaurant, or, to be more exact, a Home Counties bistro. One says to oneself: "If I were a bank, I wouldn't lend these people any money either."

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