The foundations are being laid for the sale of RBS and Lloyds. But if September’s banking report recommends a structural shake-up of the financial sector, what will George Osborne do?
In a manner that has become familiar, recent results from two of the banks part-owned by the UK taxpayer, Lloyds and the Royal Bank of Scotland, were received with ill-informed ire. The press fulminated at bonuses awarded to RBS staff despite the vast losses announced by the firm, while unions greeted Lloyds's £2.2bn profits with dismay. In reality, the Lloyds results weren't nearly as good as the quoted figure suggests. Meanwhile, RBS seems at last to be gaining traction in the turnaround that its chief executive, Stephen Hester, is overseeing. The Qatar Investment Authority, whose assets are estimated to exceed $65bn (£40bn), has expressed an interest in buying a stake in both banks. With this news, the question of when and how the UK government will sell down its holdings is again under the spotlight.
The Treasury has made it clear that it wishes to turn a profit on the £65.8bn it invested in the two banks. RBS is trading at roughly 10 per cent less than the 50p share price paid by the government for its stake, while Lloyds shares are down more than 15 per cent on the 74p purchase price. This gives the taxpayer a loss of almost £6bn on the investments at current market levels. Would the Qataris pay more to bolster their alreadyimpressive portfolio of European banks?
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