However, the real issue has centred for a long-time around the shareprice. I was all in favour last year of the concept of giving away the shares to the public and a think tank has come out today with the same idea. The idea still has much merit in that it is after all our money the Government has used. it is a good counter-point to the socialists who use our money for their gain, for the Conservatives to present back to the public their own investment - at a loss incurred by the socialists too.
there is though a better idea. The Government does not need to make a loss at all. All they need to do is instruct the bank, soon to be making profits once more, to engage in share buyback processes. This way, by cancelling shares, the price of the shares will rise. At some point in the not too far future they will be above the strike price and every further purchase will be a profit for the taxpayer or alternatively a real Sovereign Wealth Fund buyer can be found.
This way too the shareholders, mainly pension funds and retail investors, will see some return for their investment. RBS is currently valued at £37 billion, if it can clear £2 billion a year profits, which is entirely possible for this year, then that is 6% of equity bought back. The price will go up considerably over time and at little cost and with no expensive IPO or share hand-out process. Lloyds would be largely in the same bracket.
Share buybacks - the simple solution to a difficult problem. There is still the idea of break-up, but this is just silly and I will come back to later in the week.
CityUnslicker: "Share buybacks - the simple solution to a difficult problem."
ReplyDeleteFrom another perspective, it shows the management of a company has no idea what to do with the money - a bad sign.
Anon - this is completely different. the management is trying to get rid of the Government stakeholder, for once it is the opposite of the general rule.
ReplyDeleteCU: break-up, but this is just silly.
ReplyDeleteWhy is it silly? Some corporations especially banks are too big!
Make 'em smaller, more personal, more accountable (less chance of hiding naughties is smaller balance sheets).
I see some of the smaller upstarts are progressing well (Metro, Aldermore) - more power to their elbows!
Timbo - RBS and lloyds are already shrinkinh and have much further to go. Did you know RBS is ONE THIRD of the size it was in 2008...tell me how big is too big.
ReplyDeleteHSBC is much bigger, but nobody minds because it did not go bust.
wonderful and one of the great ideas ..."" More and more the Government seems to be moving towards trying to raise some much needed cash from RBS and Lloyds by selling its stake as soon as possible. There are also other reasons, such as the about to be broken EU State Aid ruling which means the said banks should be broken up a bit, which has not happened. Best if the Government was not in line for the fine on this....""
ReplyDelete""" the real issue has centred for a long-time around the shareprice. I was all in favour last year of the concept of giving away the shares to the public and a think tank has come out today with the same idea. The idea still has much merit in that it is after all our money the Government has used. it is a good counter-point to the socialists who use our money for their gain, for the Conservatives to present back to the public their own investment - at a loss incurred by the socialists too.""
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ReplyDelete"" there is though a better idea. The Government does not need to make a loss at all. All they need to do is instruct the bank, soon to be making profits once more, to engage in share buyback processes. This way, by cancelling shares, the price of the shares will rise. At some point in the not too far future they will be above the strike price and every further purchase will be a profit for the taxpayer or alternatively a real Sovereign Wealth Fund buyer can be found.
ReplyDelete