RBS has lost all of the taxpayer bailout

antrobus

CLAPTON wrote: »

I've not heard much about the NR bad bank recently : what are the loses to date ?
I seem to recall them paying considerable sums back to the government.

Briefly, having written off the rubbish, recognised the losses, and recapitalised, it's now chugging away quite nicely. It's made some windfall profits buying back some liabilities, arrears are falling, it can just sit there making a margin on its remaining book of assets and banking the profit.

CLAPTON

antrobus wrote: »

Briefly, having written off the rubbish, recognised the losses, and recapitalised, it's now chugging away quite nicely. It's made some windfall profits buying back some liabilities, arrears are falling, it can just sit there making a margin on its remaining book of assets and banking the profit.

do you know the net cost to the taxpayer to date ?
and what the net remaining assets are estimated to be worth?

Generali

CLAPTON wrote: »

I've not heard much about the NR bad bank recently : what are the loses to date ?
I seem to recall them paying considerable sums back to the government.

The 2 bad banks are pooled together as UK Asset Resolution. The same organisation runs Help to Buy. Presumably an RBS Bad Bank will have to be split in to here too.

UKAR was set up with a loan of almost £50,000,000,000 from the Government. It holds assets (loans) worth £66,000,000,000 although it's worth bearing in mind that the value of those assets will be flattered by very low interest rates: as interest rates rise, that £66bn will fall because of maths (net present value calculations).

It's also worth bearing in mind that UKAR, as a Government body, gets an implicit subsidy due to it being able to borrow using the Government's credit rating.

http://www.ukar.co.uk/

wotsthat

vivatifosi wrote: »

A couple of things still amaze me though. The first is that Fred et al have not been prosecuted, as Eric's Mum said. The second is that the government didn't 100% take over the banks. There's no way they would still exist without government intervention, so how come I've still got a small clutch of shares? I appreciate coming out of the other end with my money intact as a depositor, but as a shareholder?

I've always wondered why the shares of RBS had a value above zero.

I suppose, and am probably wrong, RBS negotiated with the government to retain some shareholder value and the government weren't willing to leave it a couple of weeks - they might have then got the bank for 'free' but would be dealing with an even more chaotic situation.

CLAPTON

Generali wrote: »

The 2 bad banks are pooled together as UK Asset Resolution. The same organisation runs Help to Buy. Presumably an RBS Bad Bank will have to be split in to here too.

UKAR was set up with a loan of almost £50,000,000,000 from the Government. It holds assets (loans) worth £66,000,000,000 although it's worth bearing in mind that the value of those assets will be flattered by very low interest rates: as interest rates rise, that £66bn will fall because of maths (net present value calculations).

It's also worth bearing in mind that UKAR, as a Government body, gets an implicit subsidy due to it being able to borrow using the Government's credit rating.

http://www.ukar.co.uk/

thanks for that


so on paper there is a potential taxpayers profit of 10-15 billion, so one could take a view that these two banks (NR & B&B) had a liquidity crisis rather than a basic insolvency problem

I take your point about the implicit taxpayer subsidy but presumably that doesn't really actually cost us anything until the lending markets start raising borrowing rates to UK gov.

tomterm8

wotsthat wrote: »

I've always wondered why the shares of RBS had a value above zero.

I suppose, and am probably wrong, RBS negotiated with the government to retain some shareholder value and the government weren't willing to leave it a couple of weeks - they might have then got the bank for 'free' but would be dealing with an even more chaotic situation.

IIRC, if RBS had become a completely state-owned bank it would have been treated differently under international banking law and would have had to start selling assets in a number of countries at fire sale prices.

antrobus

CLAPTON wrote: »

do you know the net cost to the taxpayer to date ?

My recollection was that it was something like £3 billion. But that was based on press reports from 2008 like;

The Treasury has agreed to convert £3.4 billion of the £27 billion it has loaned Northern Rock into what may be virtually worthless "shares" in the bank.
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/2794277/Northern-Rock-in-3bn-bail-out-from-taxpayer.html

But I don't think that's what's actually happened. Least ways, there's no trace of that £3.4 billion in NRAM's accounts. What actually happened was that the government injected £1.4 billion into Northern Rock plc (good bank) in order to get that sold. And it was sold for less than that, so that a loss of £480 m has already been booked on that.

CLAPTON wrote: »

...and what the net remaining assets are estimated to be worth?

At least book value, I'd guess.

Generali wrote: »

....UKAR was set up with a loan of almost £50,000,000,000 from the Government. It holds assets (loans) worth £66,000,000,000 although it's worth bearing in mind that the value of those assets will be flattered by very low interest rates: as interest rates rise, that £66bn will fall because of maths (net present value calculations)....

I'm not quite sure I see the logic of that argument. If and when interest rates rise, surely the rate charged by NRAM on it's mortgages will rise as well?

Generali wrote: »

...It's also worth bearing in mind that UKAR, as a Government body, gets an implicit subsidy due to it being able to borrow using the Government's credit rating.

NRAM pays guarantee fees.

Generali

antrobus wrote: »

I'm not quite sure I see the logic of that argument. If and when interest rates rise, surely the rate charged by NRAM on it's mortgages will rise as well?

The NPV of the loans will fall if interest rates rise.

antrobus

Generali wrote: »

The NPV of the loans will fall if interest rates rise.

I still don't see that.

I don't see how interest rates rises would effect the NRAM mortgage book any differently than any other bank's mortgage book. I don't see how the NPV of a loan changes if the rate charged on that loan moves in line with interest rate changes.

Thrugelmir

antrobus wrote: »

Events are unfolding. UKAR is profitable. It doesn't really look like a "huge black hole", now does it?

Until the asset book is finally liquidated then the outcome is uncertain.
Running down a closed book becomes increasingly expensive the smaller it becomes as well. NR didn't shall we say have the most stringent of underwriting during it's peak lending years of 2003-2008.