RBS sell-off, time to move on?
George Osborne must have concluded that to wait for RBS’ share price to hit the level that we paid for them in 2008 would take… well… forever. And he’s probably right. With the bank still mired in fines and lawsuits and with plenty more to come, the likelihood of its shares reaching that critical break even point seemed like a very distant possibility.
So George Osborne could sit there and continue to take the flak every time something goes wrong “at the state owned bank” or he can cut it loose.
There’s a chance too, as he was trying to reassure us yesterday, that starting the share sale might just give the bank some momentum (or at least the impression of momentum). The chance to get back on its own two feet without ministers forever breathing down its neck.
But there’s also a good chance the shares will just continue to languish and no momentum will be gathered at all. Rothschild, the investment bank that advised the Chancellor, has told him the “market conditions for financial assets and bank shares are currently good.”
But RBS isn’t just any financial asset. Lest anyone forget it, RBS was the bank we were forced to bail out in 2008 to the tune of £46 billion. Since then it’s been involved in a host of post-crisis financial shenanigans – from the mis-selling of interest rate swaps to the rigging of both Libor and foreign exchange markets.
Rothschild also reckons that if the Chancellor were to sell all the remaining bank shares now, from Lloyds and RBS, then overall -including all the fees paid by the banks for the assistance they received – the public would be £14 billion better off.
Although crucially, that does not include the borrowing costs for the billions in funds needed to bail the banks out in the first place. Include that and we’d still be under water.
But you can do the maths on RBS forever. The truth is, at some point the Government, the bank, all of us, have to move on.
The crucial line in George Osborne’s speech tonight is that he hopes by starting the share sale process it will “send a strong signal that RBS is on the road to recovery.”
After the roller coaster ride that we’ve all been on with RBS over the past 8 years, that’s all he really can do. Hope. Because there’s no guarantee the plan will work.