Shares in Lloyds, HSBC & RBS

Chris_Tibs

We have shares and ISAs in Lloyds, HSBC and RBS, which are now worth a fraction of our purchase price. We've recently made capital gains on the sale of land (subject of a different thread), and wonder if this is the time to sell the banking shares, and offset the losses against these gains.

We don't know how to read the market: does anyone believe we're sitting on a future fortune? or should we sell the shares (losses currently totalling £8,000)?

Thank you in advance for any thoughts on the subject.

Alz1986

Lloyds have good economics in their business - but are being dragged down by the PPI compensation, the deadline for that is August 2019 - which should give the share price a boost after.

Chris_Tibs

Thank you Alz1986, we'll bear that in mind.


Chris

Heedtheadvice

1. You cannot offset gains outside of an isa wrapper with losses within an isa. An isa has no tax implications either income or capital gains/losses - as long as is is operated within the rules i.e. legitimate.


Over the long term bank shares have been worse than poor, hsbc the only one in that group to deliver a significant dividend and they have all made capital losses, some very heavy.


I have read tips that some are now a buy, but you are asking us to look in a crystal ball!


Collective investments have been more stable and less risky than individual companies........I see no reason for change!

Chris_Tibs

Thank you Heedtheadvice


We did wonder about "in" and "out" of the ISA, and we do follow the rules - so thank you for clarifying that.


Yes...the crystal ball.... do you mean "funds" for "collective investments"? That's been our latest

approach, but we're very naive.


Thank you for your input.
Chris

bowlhead99

Chris_Tibs wrote: »

We have shares and ISAs in Lloyds, HSBC and RBS, which are now worth a fraction of our purchase price. We've recently made capital gains on the sale of land (subject of a different thread), and wonder if this is the time to sell the banking shares, and offset the losses against these gains.

Generally yes, this tax year could be a very fine time to sell, not because anyone knows where the share price is going to go tomorrow or can 'read the market' but because you have gains and have a chance to save some tax this year by offsetting the gain with losses you create; and you won't have that chance in all the other years because you may not have taxable gains in other years.

For example, say you had bought £6000 of Lloyds shares which are now only worth £600. You have a loss of £5400, ouch. Offsetting that £5400 loss against your land gains reduces your net gain by £5400 and so may save you £5400 x 20% tax. Which is £1080 of extra cash in your pocket, together with the £600 sales proceeds, so £1680 of cash

Imagine instead you don't sell the Lloyds shares now. Then you have to wait for the value of Lloyds to go up from £600 to £1680... a 180% increase from here. How long will it take Lloyds to grow in value from being the £40 billion company it is today, to the £112 billion company you'll need it to be to get a 180% improvement in its share price? Most market commentators would tell you you're in for a hell of a wait

If you have lots of high rate capital gains each and every year, then sure, you could maybe wait until next tax year when you might be able to sell Lloyds shares for a few more percent more than its going for today, *and* still use your (little bit lower) Lloyds loss to reduce your CGTbill. However, if you don't usually make big capital gains in other tax years, those tax losses are basically useless to you - you won't be able to use them other than offsetting gains, and you may not have gains over the annual exemption if you're not doing land deals (because shares and fund investments can be wrapped in ISAs and pensions etc or just sold little by little year by year without ever exceeding the annual CGT exemption).

So if it were me I would just sell the banking shares and be done with them. If you want to hold a portfolio of bank shares because you think they'll be worth a future fortune, you can always wait a couple of months and buy them back again next tax year. However, you have said you don't know how to read markets, and there's no real reason to expect these specific shares to perform better than a broader collective investment fund you could buy instead - one that owns bank shares alongside lots of other shares.

As an aside, as someone else noted, you can't use any of your losses from inside your ISA to offset your land gains. You can only use the losses on the shares that you bought and sold outside an ISA. It wasn't clear if the total £8k loss includes what would be allowed as a capital loss to offset your capital gain, or if some of the £8k is inside ISAs and therefore not useful.

LHW99

While all of the above is true, and no-one has a crystal ball - its onlly an actual loss if you sell.
Do you need the money now, or have plans to invest differently? Otherwise holding on may do no more harm.

inflationbuster

The problem with shares in general is Brexit uncertainty. The stock market doesn't like uncertainty hence stocks have not been performing well. I'm personally holding patiently until we have Brexit certainty. I hold BARC and RBS both are down but paying me dividends so i'm relaxed, it's reducing the losses after all.

Positive case: If there's a soft Brexit i.e., a deal i'd expect the market to make a recovery. It could be very bullish indeed. So you may wish to review your portfolio after March 29th (assuming we exit the EU with a deal) and see how the portfolio performs in April.

Negative case: If there's a hard Brexit you may see share prices see new lows.

Chris_Tibs wrote: »

and offset the losses against these gains.

You can't offset losses in an ISA against gains outside an ISA.

AnotherJoe

We have shares and ISAs in Lloyds, HSBC and RBS

Did you mean you have shares in ISAs in Lloyds, HSBC and RBS?


If so, as said, the rest of your questions are entirely moot as are any responses about best time to sell etc.
Sell them or not, makes no difference to anything to do with tax of any sort including CGT

AnotherJoe

inflationbuster wrote: »

The problem with shares in general is Brexit uncertainty.

The stock market doesn't like uncertainty hence stocks have not been performing well. I'm personally holding patiently until we have Brexit certainty. I hold BARC and RBS both are down but paying me dividends so i'm relaxed, it's reducing the losses after all.

Did you mean UK banking shares? Because if you mean "in general" eg worldwide stock markets, Brexit is an irrelevance and other factors have caused falls.

Regards Brexit, if the Pound falls, then for UK residents or people whose main currency is Sterling, worldwide stocks will tend to rise and even UK companies whose main income is from outside the UK will tend to rise. Or if the Brexit situation at this moment (since it changes every day) is deemed to be good for Sterling, the opposite is true.

Chris_Tibs

bowlhead99: thank you for so much information, and your explanations. No we're not expecting to have substantial gains in the future, so our inclination is to sell the banking shares before 5th April, and offset them against the gains on the land, to reduce the CGT.


Oh, incidentally, about 50% of the banking shares are in ISA wrappers, and 50% outside a wrapper, so we now know we can't use losses within the ISA.


Thank you for your help.