Tuesday 3 November 2009

UK Bank crisis costs the defence budget

There are so many releases by the Government and the banks today that it is hard to find the numbers behind the obscure statements and discussions of hybrid capital structures.

There is a reason for this, there is much to hide for both sides. Yesterday C@W pointed out that the current policy is the incorrect solution to the problem, today I have done a very preliminary skim of the numbers to come up with some fag packet costings:

Total investment in RBS - £25 billion. At some point in the future the bank will be sold off again, I would expect most if not all of this money to be recovered in time. However in the meantime it is an interest free loan for 5 years. So in effect, costing the taxpayers 2-3% per annum. So if it is 5 years before it is all repaid, then it will cost between £1 to 2 billion irrecoverable.

RBS Asset Protection - The treasury is expecting to make a £25 billion loss on this and the cost of insurance is £6.5 billion.

LLoyds Investment similar to RBS, although half the money, so another billion. No asset protection to stop the company going bust though - a real longer term concern as they also released interim results which are very complacent.

Then there is the Northern Rock mess, as I have said before, it looks like a £3 billion loss at least.

So overall, a £30 billion loss will be shouldered by the taxpayers and this is on a reasonable expectation that the smaller banks of the future are saleable.


roym said...

your sea of red has returned too...

why the opacity in the state of these banks?

also why would any loan be interest free?

the whole bonus side issue is making me chuckle though. i must be a sadist.

knowing what you know now, do you think goodwin et al should have been left to their own devices?

CityUnslicker said...

ROYM - no, if we had left HBOS/RBS then the system would have collapsed. The men who led it to the precipice like Goodwin and Cummings should be in jail though - our laws on fraud need changing in this respect.

Sea of Red has returned, but not too much for my portfolio today which makes a nice change.

I hold no financials and have not done for some time. My current plays are:

CDN (stable waiting on bid)
GKP (stable waiting on news)
HOIL (yeesh, unexpalined falls here)
EMED (up 10% today!)
AST (stable, good news to come)
EME (wobbly, news overdue)
MNR (Stable, awaiting news)
TLW (stable, brilliant company)
CHAR (manipulated, not sure why, bought in realy cheap though at 18)
IAE (Stable good company)
IERE (Stable, huge undervaluation)
PPA - just some gambling money.

out of NTOG now, that was nice though 150% up all in at the end of a few trades, could have done better too. Same with FRR



If the markets tank ther maybe some good buying opps.

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