UK Government has officially started selling off RBS at a 33% loss

[Deleted]

http://www.bbc.co.uk/news/business-33769906

The government has begun its sell-off of shares in part-nationalised lender Royal Bank of Scotland, raising £2.1bn, a third below the price it paid.
It sold a 5.4% stake at 330p a share, a 7.6p discount on Monday's closing price.

Chancellor George Osborne is facing criticism for selling the shares at well below the price of about 500p the government paid for them.

The 170p difference represents a loss of about £1.07bn on the shares sold.

The government's sale cuts the government's stake in RBS to 73%.

'Simpler and fairer'

The UK bailed out RBS in 2008 and 2009 by buying shares for £45bn and supplying it with cheap funds.

Ian Gordon, a banking analyst at Investec, told the BBC's Today programme: "The taxpayer is being short-changed."

The shares could have been sold for a higher price in February, when they were changing hands for more than 400p, he said.

However, James Bevan, chief investment officer at money manager CCLA Investment Management, said the loss was "relatively small".

The point of the UK's rescue of the bank was to prevent further damage to the economy, rather than to turn a profit on the shares, he told BBC Radio 5 live.
RBS chief executive Ross McEwan said: "I'm pleased the government has started to sell down its stake.

"It's an important moment and reflects the progress we are making to become a stronger, simpler and fairer bank. There is more work to be done but we're determined to build a bank the country can be proud of."

'Casual' loss

RBS reported a half-year loss of £153m last week after setting aside more money for repaying customers and potential legal settlements.
However, for the three months to the end of June, the bank posted a profit of £293m.

Harriett Baldwin, economic secretary to the Treasury, said Mr Osborne was following Bank of England Governor Mark Carneys' advice that a sale should now commence.

Mr Carney said in June the phased sell-off "would promote financial stability" and benefit the wider economy. As governor, Mr Carney is also chairman of the board of the Financial Policy Committee, which is tasked with protecting the stability of the financial system.

UK Financial Investments (UKFI), the company through which the Treasury owns shares in banks like RBS, "has taken the view that there is a window of opportunity to start this process," she told the Today programme.

UKFI owns the UK's stakes in Lloyds Banking Group, RBS, and the remains of the fully-nationalised lenders; Bradford & Bingley and the more-toxic parts of Northern Rock. It is run by a board who manage the investments "commercially" and report to Mr Osborne as chancellor.

But Barbara Keeley, the shadow treasury minister, accused the government of "casually" losing £1bn.

"The most important question for the tax-payer - are we getting good value for our money? This used to be something the Chancellor used to care about, he said he would only sell these RBS shares when we get good value - clearly that's not now," she told Today.

So we've finally started selling off RBS, at a discount to current value (about 10p / share below market) and at almost a 33% loss from the original price we paid for it during the bank bailouts.

Should we have held onto the shares longer in the hopes they rose? Should the Brown government have negotiated a better price for shares during the bailout? Should the last Con/Lib government have sold the shares when they were nearly 20% higher than current valuation during the last parliament?

Or are Mark Carey and George Osborne right to plan to commit to the sale of RBS prior to 2020 and just follow the market instead of trying to predict it?

No matter how you swing it or who you put the blame on (or not), the UK government (covering Labour, Con and Liberal tenures) has lost £1bn on RBS already and if they sold all their shares at this value would lose around £16bn.

[Kalis]

Should we have held onto the shares longer in the hopes they rose? Should the Brown government have negotiated a better price for shares during the bailout? Should the last Con/Lib government have sold the shares when they were nearly 20% higher than current valuation during the last parliament?

No matter how you swing it or who you put the blame on, the UK government (covering Labour, Con and Liberal tenures) has lost £1bn on RBS already and if they sold all their shares at this value would lose around £16bn.

It wasn't supposed to be an investment, it was to stabilise the bank so the economy didn't go tits up. Osborne isn't playing at being a trader, nor should he.

[Bolson13]

Same here with ABN AMRO in the Netherlands. They want to start selling later this year and also with roughly a 33% loss. They probably want to get rid of it to free up money short term (because hey, elections) but they stay in for a large part so as it doesn't crash first day on the market.

Maybe suggested to make the bank a mortgage bank (not allowed to sell/purchase investment products out side of mortgages that is) but the president thought it was silly to do with this bank, no reason given why though..

[Gamdwelf]

What does it mean for the actual stock think it will go up in value?

[Deleted]

The key piece of information here is that, as with the Royal Mail sale, the shares will be sold at a discount to "institutional investors".

"Institutional investors" is code for the "Conservative Party's city friends". Here's the way it works: the government wants to pay bribes to people in the city in exchnage for donations and public support. It can't just hand them taxpayer money because the 20% of the media opposed to it will make a fuss. So they sell off a state asset way below market value and restrict the effective access to the shares so only "sympathetic" interests can purchase the shares.

Effectively they are giving taxpayer money to pro-tory busines interests, people like Neil Woodford who continually brief for the Tories against Labour policy as "impartial business experts". Woodford made a killing on the Royal Mail sale. Not sure who will benefit this time but it is obviously going to be the same scam.

[Puremallace]

Should we have held onto the shares longer in the hopes they rose? Should the Brown government have negotiated a better price for shares during the bailout? Should the last Con/Lib government have sold the shares when they were nearly 20% higher than current valuation during the last parliament?

No matter how you swing it or who you put the blame on, the UK government (covering Labour, Con and Liberal tenures) has lost £1bn on RBS already and if they sold all their shares at this value would lose around £16bn.

UK needs their own version of Dodd/Frank. Euro banks are not even mentioned anymore because their books are still shady as fuck.

[Deleted]

It wasn't supposed to be an investment, it was to stabilise the bank so the economy didn't go tits up. Osborne isn't playing at being a trader, nor should he.

maybe not, but he should maximise the return on investment of public money. He has waited until share prices are at their lowest for some time, and with all projections saying they will rise shortly.....

Still, much like royal mail, and the channel tunnel sales, its nice he can flog stuff off on the cheap to his mates.....shame its public money he's wasting.

[Kalis]

maybe not, but he should maximise the return on investment of public money. He has waited until share prices are at their lowest for some time, and with all projections saying they will rise shortly.....

Still, much like royal mail, and the channel tunnel sales, its nice he can flog stuff off on the cheap to his mates.....shame its public money he's wasting.

Define "lowest for some time", the share price was lower at the beginning of July. He might have been able to get 350p for them if he'd been lucky with timing, but 330p isn't bad considering their price since the General Election and Osborne is undoubtedly hoping the share price will go up, as he's still got another two thirds of this shit to get rid of.

When you sell a block of shares like this, then you put a discount on it, 2.3% is a relatively small discount for 5.4%. It's an okay deal, neither good nor bad.

I'm not sure why you think "his mates" will get to buy them, or even who you think those people are. Osborne doesn't get a say in who obtains them, he isn't involved in the trading, only making them available for purchase.

And I'm also not sure why you think it's wasting public money, they weren't worth the 500p we paid for them. I understand why Darling did it, but he paid £46bn for a bank that was running out of funds...banks that have no money are not worth 500p a share, saving the economy was worth 500p a share.

[Deleted]

And I'm also not sure why you think it's wasting public money, they weren't worth the 500p we paid for them. I understand why Darling did it, but he paid £46bn for a bank that was running out of funds...banks that have no money are not worth 500p a share, saving the economy was worth 500p a share.

No, They should have bought the bank at 50p a share.
If they could scrounge up money by themselves fine, if not, extort the living shit out of them.

[Deleted]

Define "lowest for some time", the share price was lower at the beginning of July. He might have been able to get 350p for them if he'd been lucky with timing, but 330p isn't bad considering their price since the General Election and Osborne is undoubtedly hoping the share price will go up, as he's still got another two thirds of this shit to get rid of.

When you sell a block of shares like this, then you put a discount on it, 2.3% is a relatively small discount for 5.4%. It's an okay deal, neither good nor bad.

I'm not sure why you think "his mates" will get to buy them, or even who you think those people are. Osborne doesn't get a say in who obtains them, he isn't involved in the trading, only making them available for purchase.

And I'm also not sure why you think it's wasting public money, they weren't worth the 500p we paid for them. I understand why Darling did it, but he paid £46bn for a bank that was running out of funds...banks that have no money are not worth 500p a share, saving the economy was worth 500p a share.

400p a share in march and February, ok those are high points, but the share price has not been as low as it is now for the previous 12 months, except for 1 dip in may which it immediately recovered from, with the average price being significantly higher, especially in the october - February period.

33% loss, seams a waste of public money to me, and the large number of economists who are totally baffled by the decision as shown by extensive news reports today.

Break even price (ignoring interest payments on the money borrowed to buy the shares in the first place) is 441p, selling now for 330p is insanity.

If you look at long term trends, the share price has been edging up, but Osborne has waited until a slump in the share price to sell, for reasons that defy understanding. He should have postponed until the share price went up again, as pretty much everyone expects it to as the economy grows. To sell now is idiotic, unless he has ulterior motives, which is hardly unheard of in the Tory party.

And you may want to look how the Royal Mail shares were sold, now look who benefited, now compare that list to Tory donors and economic advisers.....you think its going to be different this time?

[Deleted]

400p a share in march and February, ok those are high points, but the share price has not been as low as it is now for the previous 12 months, except for 1 dip in may which it immediately recovered from, with the average price being significantly higher, especially in the october - February period.

33% loss, seams a waste of public money to me, and the large number of economists who are totally baffled by the decision as shown by extensive news reports today.

Break even price (ignoring interest payments on the money borrowed to buy the shares in the first place) is 441p, selling now for 330p is insanity.

If you look at long term trends, the share price has been edging up, but Osborne has waited until a slump in the share price to sell, for reasons that defy understanding. He should have postponed until the share price went up again, as pretty much everyone expects it to as the economy grows. To sell now is idiotic, unless he has ulterior motives, which is hardly unheard of in the Tory party.

And you may want to look how the Royal Mail shares were sold, now look who benefited, now compare that list to Tory donors and economic advisers.....you think its going to be different this time?

Most of what this government does is find clever ways to give taxpayer money, or indeed non-taxpayer money (see bank thread) directly to their friends.

Worth noting that some years ago during the IDS days the Tory party was close to bankruptcy and were bailed out by RBS.

[Kalis]

400p a share in march and february, ok those are high points, but the share price has not been as low as it is now for the previous 12 months, except for 1 dip in may which it immediately recovered from, with the average price being significantly higher, especially in the october - February period.

Politically they couldn't sell it with an impending General Election, so you need to look at post-May rates.

They took advice on when the price would be relatively stable, set up the teams and sold it. It would have taken a few days from when the decision was made, so it was a bit random that they hit 337p and sold at 330p, it could have gone up a bit, or down a bit, but a few pence on the share price wouldn't be of concern to Osborne - his job isn't to guess the markets, it's to get some money and show the markets that the Government intends to re-privatise RBS.

33% loss, seams a waste of public money to me, and the large number of economists who are totally baffled by the decision as shown by extensive news reports today.

Those shares weren't worth what we paid for them. Darling couldn't afford to negotiate, there wasn't time, so we paid what we had to pay and threw cash at RBS to stop them folding.

What some economists think is irrelevant, you'll find others that agree with the decision, as shown by the OP where there are conflicting opinions from experts.

Break even price (ignoring interest payments on the money borrowed to buy the shares in the first place) is 441p, selling now for 330p is insanity.

The original purchase price is irrelevant, they were bought at a that rate because it was what was needed to stop the UK economy dying, we didn't get a good deal, nobody at the time thought we got a good deal, getting a good deal wasn't even a consideration.

Governments need money as and when, so the asset value is current value, not potential future versus past value. To a normal investor, asset value is past value vs. potential value, though sometimes a person will take a loss in order to have access to funds immediately.

If you look at long term trends, the share price has been edging up, but Osborne has waited until a slump in the share price to sell, for reasons that defy understanding. He should have postponed until the share price went up again, as pretty much everyone expects it to as the economy grows. To sell now is idiotic, unless he has ulterior motives, which is hardly unheard of in the Tory party.

That's not how shares work, nor how share sales work and he didn't sell them in a slump - there hasn't been an RBS slump since 2011/12, expand your graph, the price has been bouncing around 350p for a couple of years now, so he sold them at a reasonable rate.

The economy growing does not mean RBS's share price will go up, their expected and reported profit/loss is what does that. They are a company whose strategic direction is ultimately at the whim of the British public, traditionally they wouldn't be thought of as a particularly attractive investment.

And you may want to look how the Royal Mail shares were sold, now look who benefited, now compare that list to Tory donors and economic advisers.....you think its going to be different this time?

It's not exactly a revelation that lots of the wealthiest people in the UK are Tory supporters, so Tory supporters profitting from share sales is about as surprising as water being wet.

Had Labour got into power and sold the shares, which they would have done at some point, then those same people would have bought them. Would that have been dodgy as well? You're straying into conspiracy nonsense.

[Deleted]

Politically they couldn't sell it with an impending General Election, so you need to look at post-May rates.

They took advice on when the price would be relatively stable, set up the teams and sold it. It would have taken a few days from when the decision was made, so it was a bit random that they hit 337p and sold at 330p, it could have gone up a bit, or down a bit, but a few pence on the share price wouldn't be of concern to Osborne - his job isn't to guess the markets, it's to get some money and show the markets that the Government intends to re-privatise RBS.



Those shares weren't worth what we paid for them. Darling couldn't afford to negotiate, there wasn't time, so we paid what we had to pay and threw cash at RBS to stop them folding.

What some economists think is irrelevant, you'll find others that agree with the decision, as shown by the OP where there are conflicting opinions from experts.



The original purchase price is irrelevant, they were bought at a that rate because it was what was needed to stop the UK economy dying, we didn't get a good deal, nobody at the time thought we got a good deal, getting a good deal wasn't even a consideration.

Governments need money as and when, so the asset value is current value, not potential future versus past value. To a normal investor, asset value is past value vs. potential value, though sometimes a person will take a loss in order to have access to funds immediately.



That's not how shares work, nor how share sales work and he didn't sell them in a slump - there hasn't been an RBS slump since 2011/12, expand your graph, the price has been bouncing around 350p for a couple of years now, so he sold them at a reasonable rate.

The economy growing does not mean RBS's share price will go up, their expected and reported profit/loss is what does that. They are a company whose strategic direction is ultimately at the whim of the British public, traditionally they wouldn't be thought of as a particularly attractive investment.



It's not exactly a revelation that lots of the wealthiest people in the UK are Tory supporters, so Tory supporters profitting from share sales is about as surprising as water being wet.

Had Labour got into power and sold the shares, which they would have done at some point, then those same people would have bought them. Would that have been dodgy as well? You're straying into conspiracy nonsense.

I'll not point by point as that just quickly gets ridiculous.

But, yes its a slump, overall price is rising, albeit slowly for a while, with a recent drop in value, but overall trend is expected to recover and continue rising.

As for tory voters (donors..) benefiting. Yeah, its a bit odd they took advice from their mates, who were the ones that set the royal mail share valuation, and then these people got first dibs, bought as many as they could, and the share price skyrocketed......a cynical (realistic) person may find that somewhat dodgy.

[Kalis]

I'll not point by point as that just quickly gets ridiculous.

But, yes its a slump, overall price is rising, albeit slowly for a while, with a recent drop in value, but overall trend is expected to recover and continue rising.

As for tory voters (donors..) benefiting. Yeah, its a bit odd they took advice from their mates, who were the ones that set the royal mail share valuation, and then these people got first dibs, bought as many as they could, and the share price skyrocketed......a cynical (realistic) person may find that somewhat dodgy.

There is nothing at all ridiculous in what I said, there was a error in the first response when I said 'days' instead of 'weeks', but apart from that everything I have written is accurate.

I was trying to be polite but fuck it, you didn't bother, so I won't either...

You have no place arguing a position because you don't even have a grasp of the simplest concepts, they are so basic, yet somehow they elude you.

It's like talking to a left wing conspiracy theorist version of a Daily Mail reader, you break it down into easily understood bite-sized chunks of information in order that can they debate on what actually happened, rather than what they think happened. However, when you ask if they've understood, they just regurgitate their original horseshit and resume dribbling.

[Deleted]

Had Labour got into power and sold the shares, which they would have done at some point, then those same people would have bought them. Would that have been dodgy as well? You're straying into conspiracy nonsense.

What Labour may or may not have done in some hypothetical universe is hardly relevant. It is pretty fucked-up you think the Labour party is some sort of moral benchmark after the decade of new labour, and perverse given you obviously aren't a supporter.

In this case it is Tories giving their mates backhanders, and it is very obvious to any who is even vaguely familiar with stock valuations. They are solely responsible for that, and you are condoning that fraud.

[Kalis]

What Labour may or may not have done in some hypothetical universe is hardly relevant. It is pretty fucked-up you think the Labour party is some sort of moral benchmark after the decade of new labour, and perverse given you obviously aren't a supporter.

In this case it is Tories giving their mates backhanders, and it is very obvious to any who is even vaguely familiar with stock valuations. They are solely responsible for that, and you are condoning that fraud.

Provide some evidence of wrongdoing, if you can you'll bring down the Tory Government. People claim all sorts of things look a bit dodgy, it doesn't mean they are dodgy.

[Yvaelle]

UK needs their own version of Dodd/Frank. Euro banks are not even mentioned anymore because their books are still shady as fuck.

Dodd/Frank was castrated before it got through the legislature - it's feel-good legislation at this point - but has virtually no impact on banking practices. If anything, I'd bet on another US financial crash in the next 3-8 years.