How much could we make out of RBS?

[DonkeyApple]

£1 per share profit is not all that likely.

It's going to be a long time before it goes over 50p as the entire world knows that 70% of the stock is in overhang and that the seller is a fkwit and will sell at the wrong timeand at a hefty discount (probably before the next election).

So, basically there is no need to buy the stock now as a large chunk of it will be hitting the market at a massive discount in the next few years. In the meantime, let the UK taxpayer carry the risk of holding the stock.

However, what may be a prudent move by the Govt would be to split RBS back into ABN and a crap retail op, then sell off the ABN side. That would almost certainly get them the best price and remove theproblem of not being able to sell the retail business to the firms best able to pay for it due to competition rules.

They could then smack Lloyds with a break up demand as they hold too much retail highstreet space and package their unwanted tat with the remnants of RBS, rebrand it and float it off as a new, dynamic, peoples' bank and watch the fkwits who have already paid for the bank buy their own holding for even more money.

[Beardy10]

DonkeyApple said:

However, what may be a prudent move by the Govt would be to split RBS back into ABN and a crap retail op, then sell off the ABN side. That would almost certainly get them the best price and remove theproblem of not being able to sell the retail business to the firms best able to pay for it due to competition rules.

Not sure I understand that logic....how would the enable RBS to sell it's retail operations to the established players ? It's the size of the potential buyers exsisting operations that is the problem surely ? You seem to be ignoring all the other RBS business lines there were other than the retail operation too? Corporate Banking, Investment Banking etc etc. You also seem to be forgetting that RBS only bought part of ABN...so you can't just put all the pieces back together.

[DonkeyApple]

Beardy10 said:

DonkeyApple said:

However, what may be a prudent move by the Govt would be to split RBS back into ABN and a crap retail op, then sell off the ABN side. That would almost certainly get them the best price and remove theproblem of not being able to sell the retail business to the firms best able to pay for it due to competition rules.

Not sure I understand that logic....how would the enable RBS to sell it's retail operations to the established players ? It's the size of the potential buyers exsisting operations that is the problem surely ? You seem to be ignoring all the other RBS business lines there were other than the retail operation too? Corporate Banking, Investment Banking etc etc. You also seem to be forgetting that RBS only bought part of ABN...so you can't just put all the pieces back together.

The issue is that you can't sell the retail op for a good price because the firms large enough and with the desire to py up wouldn't be allowed due to the rules.

This is why I was saying strip out the corporate arm and sell that as there are no such restrictions and you should be able to get a fair price, then merge the retail side with the retail parts of Lloyds that they will need to dispose of to comply with competition rules (the one's that GB bent to get the deal done) and float that off as an all new shiney highstreet, peoples brand to the very people who technically already own it

No Govt ever really get's fair value when selling an asset off so I dont expect this or the next one to do so when offloading RBS, which is why I suspect the price is unlikely to march forward any time soon.

However, in reality I would expect this Govt to sell off a significant stake before the next election.

[Beardy10]

DonkeyApple said:

This is why I was saying strip out the corporate arm and sell that as there are no such restrictions and you should be able to get a fair price, then merge the retail side with the retail parts of Lloyds that they will need to dispose of to comply with competition rules (the one's that GB bent to get the deal done) and float that off as an all new shiney highstreet, peoples brand to the very people who technically already own it

Lloyds couldn't buy it/merge with it as they already have too big a share of the retail market....especially mortgages following the HBOS "aquisition". Oh and Lloyds are currently trying to build there own Investment Bank so I guess HM Govt as the largest shareholder must approve of them!

[DonkeyApple]

Beardy10 said:

DonkeyApple said:

This is why I was saying strip out the corporate arm and sell that as there are no such restrictions and you should be able to get a fair price, then merge the retail side with the retail parts of Lloyds that they will need to dispose of to comply with competition rules (the one's that GB bent to get the deal done) and float that off as an all new shiney highstreet, peoples brand to the very people who technically already own it

Lloyds couldn't buy it/merge with it as they already have too big a share of the retail market....especially mortgages following the HBOS "aquisition". Oh and Lloyds are currently trying to build there own Investment Bank so I guess HM Govt as the largest shareholder must approve of them!

But I'm not saying that Lloyds would buy it. The exact opposite.

I've said that Lloyds is already too big on the highstreet as per the rules and so should offload some of the units. It's these units you merge with the RBS retail, completely rebrand and flog to mugs using some super cool story of a peoples' bank.


Wake up man. ;)

[Beardy10]

DonkeyApple said:

I've said that Lloyds is already too big on the highstreet as per the rules and so should offload some of the units. It's these units you merge with the RBS retail, completely rebrand and flog to mugs using some super cool story of a peoples' bank.


Wake up man. ;)

You've obviously missed the news that RBS are having to flog branches as they are already breaching competition rules!?!?

http://news.bbc.co.uk/1/hi/business/8550370.stm

Some of are awake

[DonkeyApple]

Beardy10 said:

Some of us are awake

But not too awake?

I hadn't seen that

[elster]

Beardy10 said:

DonkeyApple said:

I've said that Lloyds is already too big on the highstreet as per the rules and so should offload some of the units. It's these units you merge with the RBS retail, completely rebrand and flog to mugs using some super cool story of a peoples' bank.


Wake up man. ;)

You've obviously missed the news that RBS are having to flog branches as they are already breaching competition rules!?!?

http://news.bbc.co.uk/1/hi/business/8550370.stm

Some of are awake

Keep up at the back.

RBS is in talks to have Post Offices act as cashier desks, along with other banks. Somaybe a lot of banks will downscale and the banking will be done through a central post office system.

[s2t]

The best way for the share price to rise is for the Government to relax its limitations on when RBS can pay dividends. Once that is lifted and hester has finished the re building then the share price will rise.
why would anyone wish to invest in RBS just now with the share price bouncing between 40-50p and no dividends being paid?
So to kick start it and also for the government to make a profit - relax the payment of dividend restrictions

[Cogcog]

Back down to 41p.

[s2t]

Cogcog said:

Back down to 41p.

Buying opportunity as history would suggest will rise to 50p-ish over the next few weeks

[DonkeyApple]

s2t said:

Cogcog said:

Back down to 41p.

Buying opportunity as history would suggest will rise to 50p-ish over the next few weeks

Now, I don't follow RBS but the fact that it fell heavily this week when the only significant news for the banking sector in the UK was the potential default of Ireland would suggest at a glance that RBS have heavy exposure to this market which if a default occurs could lead to massive asset write downs?

Worth researching prior to lobbing any money away.

[Beardy10]

It is the Irish exposure that forces the price down.

The problem for the UK Govt in owning RBS is that the only time RBS will be worth anything profitable is when the economy is on the way to recovery, at which stage tax revenues etc will be on the way up anyway. So whilst it is potentially going to be a good asset to own for HM Govt it's only going to be worth anything when it is doing much better anyway.....it's actually a REALLY st asset to own on that basis! It would be much better if it's fortunes weren't as closely linked to the economy. In the meantime they have to go through all the crap about how much they have to pay the staff to retain them etc. More trouble than it's worth.

[NoelWatson]

s2t said:

Cogcog said:

Back down to 41p.

Buying opportunity as history would suggest will rise to 50p-ish over the next few weeks

?

[Horrocks]

I wish I knew what was being discussed here.

FML

[DonkeyApple]

Beardy10 said:

It is the Irish exposure that forces the price down.

The problem for the UK Govt in owning RBS is that the only time RBS will be worth anything profitable is when the economy is on the way to recovery, at which stage tax revenues etc will be on the way up anyway. So whilst it is potentially going to be a good asset to own for HM Govt it's only going to be worth anything when it is doing much better anyway.....it's actually a REALLY st asset to own on that basis! It would be much better if it's fortunes weren't as closely linked to the economy. In the meantime they have to go through all the crap about how much they have to pay the staff to retain them etc. More trouble than it's worth.

A quick check has confirmed what I guessed. Mkt cap of £24B and liabilities in excess of £50B to Ireland. In other words, RBS is gone if Irish banks default.

They only have to go to 50 p in the pound and RBS is wiped out. I've never seen a default which lead to any more than a few pence on the pound as the debt outcome.

RBS is now a play on the saving and recovery of Ireland.

Greece will be coming back for more cash very soon as they will have pissed the bail out funds up the wall and done nothing to cut spending. The EU is fast running out of time and lacks real leadership, the kind that is strong enough to let the weak die to save the majority.

They need to cut Greece loose and take control of the other Med states and butcher their spending.

[NoelWatson]

DonkeyApple said:

They only have to go to 50 p in the pound and RBS is wiped out. I've never seen a default which lead to any more than a few pence on the pound as the debt outcome.

There have been loads

http://www.reuters.com/article/idUSN06393286200810...

[DonkeyApple]

NoelWatson said:

DonkeyApple said:

They only have to go to 50 p in the pound and RBS is wiped out. I've never seen a default which lead to any more than a few pence on the pound as the debt outcome.

There have been loads

http://www.reuters.com/article/idUSN06393286200810...

That's refering to sums insured. Do we know if all contracts were written on 100% of value?

I also wouldn't class Ireland debt in the same park as US?

[NoelWatson]

DonkeyApple said:

NoelWatson said:

DonkeyApple said:

They only have to go to 50 p in the pound and RBS is wiped out. I've never seen a default which lead to any more than a few pence on the pound as the debt outcome.

There have been loads

http://www.reuters.com/article/idUSN06393286200810...

That's refering to sums insured. Do we know if all contracts were written on 100% of value?

I also wouldn't class Ireland debt in the same park as US?

I was referring to

"This risk was avoided on Monday, with contracts on Fannie Mae's subordinated debt recovering 99.9 percent of the sum insured, and swaps on Freddie Mac's subordinated debt recovering 98 percent, according to results published by auction administrators Creditex and Markit."

Not sure how Irish banks would compare, to be sure.

[Beardy10]

DonkeyApple said:

NoelWatson said:

DonkeyApple said:

They only have to go to 50 p in the pound and RBS is wiped out. I've never seen a default which lead to any more than a few pence on the pound as the debt outcome.

There have been loads

http://www.reuters.com/article/idUSN06393286200810...

That's refering to sums insured. Do we know if all contracts were written on 100% of value?

I also wouldn't class Ireland debt in the same park as US?

FNMA and FMAC are NOT good examples of recovery rates in default, it was a very unusual situation....they vary widely depending on the type of institution or even country involved. The market assumes broadly for corporates that recovery would be 40%.....some say that is optimistic others think that's pessimistic but that's a rule of thumb.

Also what Mr Watson is quoting there is the recovery on the credit derivative/default swap which is the recovery thirty days after it defaulted....the actual recovery which can take many years to work out can be very,very different.

As an example of how real recovery differs from credit derivatives I bought some GM bonds before it defaulted in my pension ( I bought them because the price had 95% priced in a default). I now two years later have made a 45% profit despite my bonds having defaulted.....