“ANY OFFER FOR SALE OF RBS SHARES WILL REQUIRE SOME DEFT HANDLING”

 

On 9th May news filtered through that RBS had finally agreed to pay a $4.9 billion fine for mis-selling mortgage related securities. Superficially there appeared to be not too many more skeletons left in this bank’s cupboard – just the GRG small business scandal. On that date the shares stood at 276p.  Some diseased-ridden minds started to work overtime. People remembered George Osborne’s offer of 5% of the taxpayer’s shares at 330p with a possible discount to the price at the time. Could Philip Hammond consider selling through UKGI some shares back to the public, which ten years ago had been stripped of its raiment? RBS’S share quickly bounced to 290p. Since then, they have drifted back to 280p today.  The problem is the banking sector remains deeply unloved.

 

I suspect we need a great deal more meat on the bone from Philip Hammond.  Will the taxpayer get his/her money back? I doubt it. However, to get RBS off the government’s balance sheet is important for an optics and credibility perspective. Breakeven is 502p. Maybe news will come out this week that 10% of the share capital with be offered for sale, with the remaining £12 billion shares being offered over the next 5 years. That depends of course on market conditions and investors loathe overhangs of share offers and the share price often reacts adversely. I think the public needs to know whether Ross McEwan is staying or not.  Confidence in the management is vital. Watch this space!

 

David Buik

Core Spreads

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