If RBS go National next week, do shareholders lose their money?

opinions4u

GDB2222 wrote: »

Yes, I'd bet on up. The market hates instability and risk, and it will reward greater stability and certainty. The B&B and NR nationalisations are now seen as a bad example, because they left shareholders with nothing, thus not encouraging any further investment into banks.

This is true, and let's be honest, the big boys are somewhat more diverse than B&B and NR - even HBOS.

B&B had a mortgage book full of buy-to-let that was deteriorating badly. Not likely to survive as a going concern. My view is 2p share price would over value them.

NR appears not to be quite so bad. Running ok as a going concern, alb it with a shrinking mortgage book. Possibly a case for returning value to original shareholders when the winds are blowing fairer.

In hindsight - and it is only that - if the bank bailout plan had been made available 13 months ago then Northern Rock would have a future and a lot of the pressure on UK banks we have seen recently would have been avoided.

Looking 5 years down the line, I can see a NR privatisation issue being over subscribed!

master_ian

Today's Guardian:

'More details of the Treasury's plan were unveiled yesterday, with the recognition that if it fails, wholesale nationalization of Britain's banking system is the only alternative. The government will buy up shares in the banks that choose to participate in the plan at market prices, and place them in an arms-length fund. When the immediate crisis is over, the Treasury hopes to offload the shares to investors'.

cos69

StevieJ wrote: »

If the Govt injects capital and takes shares as recompense the share price should not change from this move. The share price may in fact go up because of the perceived stabilty.

Yes - you would have thought so

Unfortunately shares are usually valued on the basis of their earnings per share (or expected earning per share) - so double the shares in issue, then its half the earning per share which is why shares often fall after/during a rights issue.

In the current climate, its hard to know what factors valuations are based on, so as others say the extra stability might see the price increase

sabretoothtigger

Which bank will be first to tap taxpayers?

Well I would expect Royal Bank to raise the capital it needs over the weekend. On paper its balance sheet looks okay. But its board has concluded it needs a further cushion of capital, perhaps as much as £10bn.

This need not spook any depositor or saver with RBS. In fact the contrary is true. RBS will be all the stronger for strenthening its balance sheet and accessing the Treasury's interbank guarantee.

But it's a terrible humiliation for RBS's chief executive, Sir Fred Goodwin - who broke all British records by raising £12bn in a rights issue less than six months ago.

After the eyewatering fall in RBS's share price at the end of last week, RBS's entire market value is now less than the cash it raised just a few months ago. And in terms of what can damage the credibility of a chief executive, it doesn't get much worse than that

http://www.bbc.co.uk/blogs/thereporters/robertpeston/

Sapphire

Isn't Goodwin of RBS about to retire anyway (presumably with many ill-gotten gains)? :mad:

hermanmunster_3

Just been watching India / Australia cricket on TV with RBS logos everywhere - ..... don;t suppose they will have the spare cash to do that sort of sponsorship in the future... what am I saying --- they never have had that sort of money they just borrowed it from elsewhere!!!

.. during the adverts Halifax where advertising ... can they really afford to pay for advertising ... send them over to the DFW board I say

ExBanker_2

Fred Goodwin resigned on Wednesday morning, should be publicly announced next week. I understand RBS have refrained from releasing this information in fear of the consequences it could have at this point in time.

Alos.. it looks like the govenrment will be taking 50% stake in RBS!

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article4926316.ece

anna42hmr

thanks for the links everyone, looks like we will have to wait and see

baby_boomer

Since this is about recapitalisation, the government is likely to insist that dividend payments are suspended until the crisis is over and the banks have grown their capital (by putting up charges and setting low interest rates for savers and high interest rates for borrowers).

Meanwhile the government, with an eye to the voters and no shame, will continue to berate bankers for these worsening interest rates that it will insist on.