£66bn the taxpayer is unlikely to see again...bank bailouts

Graham_Devon

This was supposed to be profitable, according to some, especially politicians and some (shall we say) optimists.

We already lost £2bn with Northern Rock, and it now seems an extra £66bn could have to be written off that was invested in RBS and Lloyds.

http://www.bbc.co.uk/news/business-20349579

grizzly1911

Graham_Devon wrote: »

This was supposed to be profitable, according to some, especially politicians and some (shall we say) optimists.

We already lost £2bn with Northern Rock, and it now seems an extra £66bn could have to be written off that was invested in RBS and Lloyds.

http://www.bbc.co.uk/news/business-20349579

Not sure invested is the right word.;)

michaels

1 as far as I know the bank shares we own still have value just less than we paid so on. current valuation we are down 20'm not 66?
2 I understand the final NR figure will take up to 20 years to do, and that 2bm loss is just one estimate

chewmylegoff

presumably when margaret hodge said there is a risk that £66bn will never be recovered, what she meant was that not all of the £66bn would be recovered. it seems quite unlikely that the whole £66bn would have to be written off as that would mean that both RBS and Lloyds, which currently have a market capitalisation of £30 billion or so each (making the govt's total "investment" in the two combind currently "worth" about £40bn), are actually worth £0.

there seems to me to be a good chance that the govt will lose at least 50% of the £66bn though.

sabretoothtigger

You can see how likely it is from the share prices. They are not quite as bad as they were and losing the whole amount is quite unlikely because they were never entirely broke just illiquid

They'll get back 100% and the regret will be how many years its taken and what interest did they get, I dont think it'll be that much.
They written articles in the past about how we could make money from this marvellous scheme, just like BOE making money on QE. Its possible though essentially both bailout types were wrongly justified

Graham_Devon

michaels wrote: »

1 as far as I know the bank shares we own still have value just less than we paid so on. current valuation we are down 20'm not 66?

Yer, but the point is rather whether we will ever be able to sell them and recoup the money, which seems unlikely (at present). Even if the shares had a paper value above what we bought them at, it's still just that, a paper value. We have to convert that paper value into real cash, which is the sticking point.

I guess we'll get something back. It's just what that something is, and it could be a hell of a long time before we know what it is.

Just annoys me that we had so may articles written etc that it would all be profitable, when it was absolutely clear from the outset (which is why many of us were stating so) that it wouldn't be. The wool is constantly pulled over eyes.

PaulF81

This is why qe will not cause inflation. The inflation has already happened.

Daedalus

Do we get dividends?

Wookster

The face of banking has changed, Basel III and a return to bear markets is making banking less profitable.

Of course that will be reflected in the valuations.

antrobus

Graham_Devon wrote: »

...We already lost £2bn with Northern Rock....

NRAM made a pre-tax profit of £900m+ in 2011, and £300m+ in the first half of this year. At that rate it won't take long to make up the £2bn. My recollection is that UKFI expects that NRAM will eventually generate a cash surplus of over £10bn; although it will be spread out over the next 10-15 years as the loan book runs down.

Graham_Devon wrote: »

...
and it now seems an extra £66bn could have to be written off that was invested in RBS and Lloyds.....

There is a risk that the £66bn invested in RBS and Lloyds Banking Group by the government may never be recovered, a parliamentary committee has warned

Says the BBC. Well, duh? Let's state the obvious while we're about it. All depends don't it. Sweden managed to break even, after its bank bailout in the early 90s, so I'm sure it's at least possible.

Graham_Devon wrote: »

....
http://www.bbc.co.uk/news/business-20349579

Interesting to note,

(1) the Public Accounts Committee's comments about how 'fortunate' and 'lucky' the government was in offloading Northern Rock to Virgin. Anyone would think that they were implying that Georgie Porgie had actually have made the right decision for once.

(2) Hodge's remarks about the inability of the Treasury "to respond promptly to the banking crisis" etc and so forth. Anyone would think that she was implying that the government of the day didn't have the faintest idea of what to do about it all.

StevieJ

Graham_Devon wrote: »

Just annoys me that we had so may articles written etc that it would all be profitable, when it was absolutely clear from the outset (which is why many of us were stating so) that it wouldn't be. The wool is constantly pulled over eyes.

Have you not read the full article?

"We had EU issues," said Ralph Silva, banking analyst at SRN. "We couldn't have done the same thing as the US did because the EU would have called it state aid."
But Mr Silva added that it was perfectly possible for the UK to make a profit from its bank bailout as long as the government was prepared to wait long enough to sell the shares.
"The time period for the recovery is in doubt, but I don't know anybody who doubts that there will be a recovery, and investment banks like RBS do very well when economies recover."