ROYAL BANK OF SCOTLAND – How much longer must the taxpayer/Government carry this gargantuan debt of £45 billion?
Many investors, particularly those with diseased-ridden minds working overtime, will have noticed that RBS’s share price has rattled up from 207p on 7th April 2016 to 253p yesterday – up 22.2%. However RBS’S share price is still a country mile away from the taxpayer/UKFI from getting its money back (£45 billion) – 504p being the break-even price. It will not have escaped many peoples’ notice that until the last week the banking sector has not exactly been vogue. To add to the gloom, European banks are in a dire state of disrepair and probably need capital injections across the region to the tune of E300 billion.
UK banks report early next month and results have not make overly pretty reading – continued low interest rates; cost of capital becoming penal; PPI claims refusing to go away and the threat of higher impairment charges, particularly to the energy and oil sector, where non-performing loans must be increasing.
There is still another 4 years for this parliament to run, but Chancellor Osborne will be keen to sell RBS down before the next election, particularly as cutting the UK deficit and its borrowing requirement is proving to be a task of Herculean proportions. In allowing and probably encouraging Lloyds Banking Group to pay a special dividend in February, huge inroads have been made in clearing the Black Horse’s debt, very ably orchestrated by Morgan Stanley.
I suspect, that in the hope that Ross McEwan and his colleagues have been tidying up RBS’S balance sheet, whilst continuing to dispose of non-core assets, this bank will be coming in to remission. Assuming that the management’s efforts have been relative successful, few would be surprised if, after the disposal of William & Glyns Bank (the branches that were supposed to be bought by the Coop), UKFI will be under instruction to start selling off RBS’S shares. RBS may well be instructed to pay a special dividend, thus precipitating the disposal of this gargantuan debt. The market will need to be on good terms with itself. But the challenge will be met by Goldman Sachs and NM Rothschild with relish – Just think about those fees! The mind boggles! It may well be worth keeping a beady eye on this bank, which has been a real basket case!