Alistair Osborne: Business commentary
Published at 12:01AM, June 11 2015
Bank shares can be tricky to get right. So always take a portfolio approach to investing. That way, if you lose money on one of them, like £7.2 billion on RBS, for example, you can always claim to have made out big time on the others. Everyone will believe you, especially if they’re drunk.
Stock-picking techniques like that don’t often get a public outing. So, how nice of George Osborne to bring his to the Mansion House last night, so providing a fleeting distraction from the wine. He made a case for getting shot smartish of the taxpayer’s 80 per cent stake in RBS, even if it costs us a fair bit.
No matter. His advisers from Rothschild have crunched the numbers and found we’re quids in, anyway, at least if you miss out one gigantic figure altogether. We spent almost £108 billion, rescuing the likes of Lloyds, Northern Rock and Bradford & Bingley and, apparently, we’re £14.3 billion up, even accounting for the RBS loss.
Sure, you have to include such things as the £6.6 billion of gains from the special liquidity scheme and credit guarantee scheme, and make assumptions about future proceeds from the Rock and B&B, which now look such fantastically profitable businesses it’s a wonder they went bust. Yet, you also have to overlook one crucial thing, as a teensy footnote in Rothschild’s report admits: “the cost of funding the interventions”. Indeed, its report assumes the £108 billion was free money. If only the bailed-out banks could have had funding like that.
True, there may be sound reasons for taking an initial hit on the RBS sale. It will bring extra share price liquidity, boost RBS’s commercial credentials and maybe produce a more valuable investment once the government’s out of the way of Ross McEwan, the RBS chief executive who’s doing a decent job. Yet the chancellor doesn’t have to pretend we’ve all made a packet on the bank shares. His remark that “we may get a lower price” for RBS “than Labour paid for it” was pretty cheap too. What would he have done? Paid less and seen it wreck the economy?