Wednesday 9 February 2011

Osborne; Don't buy Bank Shares

Hmmm...lots of comment on the Merlin talks and Bank taxes today. Ed BAlls made a fine point about Public Sector workers having their pay published and not bankers; OK one set are tax paid servants, but in the politics of envy world perhaps it would be easier if we just published what everyone earned. Then perhaps people would get seriously angry with the Hedge Funds who make the Bankers seem like paupers.

On a trading note, I see the Banks can still pay bonus's in shares, which is dilutive to their current share holders and also that the new tax is on them as institutions, not on the individuals. So the banks will swallow hte tax phit and by default, there will be less funds for distribution to shareholders. I already see Banks as a masssively unattractive equity position, this has made it worse.

I do wonder how with these types of measures the Government can hope to sell its stakes at breakeven or a profit. Perhaps the more sensible thing would be to let them make hay now and whack 'em once you have stuffed some Soveriegn Wealth Funds with the Equity; this is what the City tries to do with IPO's after all.


Steven_L said...

After big financial crises the banks get shafted with regulation, well, that's the historical norm.

Thing is, after this one, the central banks are doing everything they can to up their margins.

The idea is 'we've learned form the past' but if we'd just had a good old fashioned tarring and feathering/ducking/flogging or something then got back to 'business as usual' I reckon we'd have seen this banking thing out a lot quicker.

Anonymous said...

I still think money lending and investment banking need separating.

CityUnslicker said...

Anon - As do I, maybe not in different organisations at the hold co, but in structures that allow retail not to cross-subsidise investment banking as a minimum.

Anonymous said...

I have never bought bank stocks because I have no idea what I would really be buying.

Some of their "assets" are always unsaleable and they have ways of tucking monstrous problems away on and off balance sheets. Since they sell confidence and they really exist for the benefit of executives rather than owners all the incentives are geared to misleading shareholders.

I had a tip that the current CEO of RBS has a either a lot of shares from his incentive scheme becoming saleable. (Or was it a bonus linked to 3 -year performance?? - getting old).

Either way - told to expect some impressive results this year end and a temporary lift in the shares.

Even so, there are t0o many things which could destabilize them and I am not even going to hold their shares for a day.