Bank Shares & Nationalisation

full-time-mum

What happens to shares when banks nationalise?

My Mum has shares in a high street bank brought as part of an employee share scheme. They are now worth peanuts but she is wondering whether they will be worth nothing if the bank is nationalised.

Thanks

Aegis

Shares essentially cease to exist on nationalisation. The shareholders may be eligible for compensation, but that may take some time to come through. Exactly what would happen with a sharesave scheme isn't something I've previously thought about, so I have no answer there. I suspect that it would have to simply pay out the accrued cash amount.

Lokolo

Peanuts would be worth more

hopefulfooluk

Yeah you're better off considering any shares owned would become worthless if the company they are held with are nationalised. Compensation is a bonus - don't count on it.

cwcw

hopefulfooluk wrote: »

Yeah you're better off considering any shares owned would become worthless if the company they are held with are nationalised. Compensation is a bonus - don't count on it.

But why would they? Doesn't the government have to buy out the shares to nationalise the bank? It doesn't seem fair that if you own a share of a company, even if it is 0.00000000000000001%, the government steals it off you completely.

Aegis

cwcw wrote: »

But why would they? Doesn't the government have to buy out the shares to nationalise the bank? It doesn't seem fair that if you own a share of a company, even if it is 0.00000000000000001%, the government steals it off you completely.

If the government deems that it is in the best interests of the country to nationalise a bank, then they can do so without paying you the market value for the shares. The compensation will usually then be based on the likely market value of those shares had the government not stepped in, which you can imagine is not much for a lot of these banks now.

Pssst

I get the vibe that some people get a certain amount of joy in advising that banking shares are/would be wortheless.

We all know who cuased these problems but small shareholders and pension funds should not be the ones to pay the price as they can least afford to.

So let us try not to feel too smug when the small fry are in danger of losing what could be a significant wadge of savings.

CLAPTON

The sad reality is that the when a bank is so desperate that it agrees to be nationalised it is effectively worth nothing otherwise it would raise money from the market.

hopefulfooluk

Pssst wrote: »

I get the vibe that some people get a certain amount of joy in advising that banking shares are/would be wortheless.

We all know who cuased these problems but small shareholders and pension funds should not be the ones to pay the price as they can least afford to.

So let us try not to feel too smug when the small fry are in danger of losing what could be a significant wadge of savings.

I hope you're not referring to me - in the scheme of things I am also 'small fry' - I just don't want to see anyone lose what they can't afford to lose, as a lot of people appear to have the idea that putting money into bank stock is a better idea than saving it, when they have no savings.

Nobody knows which way these are going to go for sure - that's what makes it so volatile - it's up to the individual to weigh up the risk. I am prepared to take the risk but I don't want the next person to do the same thing just because I've done it - everyone needs to make their own decision - we can only inform them of the risks.

Steve_xx

full-time-mum wrote: »

What happens to shares when banks nationalise?

My Mum has shares in a high street bank brought as part of an employee share scheme. They are now worth peanuts but she is wondering whether they will be worth nothing if the bank is nationalised.

Thanks

Your Mums shares will become worthless if the bank nationalises. Though the government may pay out a small amount for the shares.

If, however, your Mum had not yet bought the shares, ie she was still saving in the company scheme, then she would not have to buy the shares and she would be able to recover her savings.

opinions4u

Should the government nationalise a bank where the alternative would be to declare the bank insolvent, my view is that those shares are pretty close to worthless.

Deciding how much "pretty close" is could be a difficult task.

In the case of both Northern Rock and Bradford & Bingley, the banks would have collapsed without government intervention.

The key question is "what would shareholders have got back after all creditors had been repaid in this case?". This could potentially take as long as the term on the longest mortgage to establish precisely - so the answer would take until the final customer with an interest only mortgage sell that house or dies! 40+ years!

The likelihood of recovering money from Northern Rock is actually higher than for Bradford & Bingley - as B&Bs loan book is more likely to suffer losses.

So Northern Rock shareholders should expect very little and B&B substantially less than very little.

I think there is little appetite for 100% nationalisation of the banks tbh. Just ever increasing government stakes being taken until the banks can operate effectively without it.

Until they can, you will see crap share prices.