Selling off the taxpayer stakes in Royal Bank of Scotland and Lloyds Banking Group could take years, according to financial experts who also told a committee of MPs that banker bashing needed to stop to help the shares prices recover.
The experts – including investment bankers and senior fund managers – said that attempts to break up RBS might reduce the amount that taxpayers receive for their stakes.
With the share prices of both banks trading at less than half the £65bn that the government used to buy shares, Manus Costello, a managing partner of City broker Autonomous, said it was the wrong time for any sell off.
He pointed out that none of the bank analysts had a share price target for RBS above the 50p average price at which taxpayers bought their 83% stake. RBS shares were trading at 22p on Tuesday.
The political furore in January surrounding a £1m bonus for its chief executive, Stephen Hester, had raised concerns among investors.
Hester waived the bonus and admitted that he had considered resigning. Robert Talbut, chief investment officer of Royal London Asset Management, said that holding on to key staff was "going to be significantly inhibited if they do not believe they can be paid at a commercial rate".
Richard Buxton, head of UK equities at Schroders, described the management team at RBS as "doing a fantastic job" but added that Hester could not be paid a "commercial rate".
Keith Skeoch, chief executive of Standard Life Investments, said that while public anger towards banks was understandable, it could have an impact on the share price.
Attempts to sell off a sizeable stake to sovereign wealth funds in Abu Dhabi met with a mixed response from investors. Buxton said he would be disappointed if there was a sale to a sovereign wealth fund which was then able to a make a "lot of money".
He added: "If you are prepared to be patient you don't have to give the taxpayers' money to a sovereign wealth fund."
The Treasury select committee also asked about the feasibility of a plan, first raised by Liberal Democrat MP Stephen Williams, to hand shares to 45 million individuals on the electoral roll.
Williams said: "This is a very popular idea which would give the public something back for bailing out the banks." Graham Webb of the advisory group Solid Solutions revealed that he and bankers from Barclays Capital had been working on the give-away plan, devised by Portman Capital.
He likened it to the demutualisation of Halifax, when 8 million people were handed shares, but three or four times larger.
The bankers argued that share sales could start below the 50p break-even point in RBS – an argument that has already been made by UK Financial Investments which controls the taxpayer stakes in the banks.
Adam Young, co-head of equity advisory at Rothschild, said that a "good strategy is to start the disposal at the lower price and build it up over time", although it could take five years to privatise RBS.
While Buxton reckoned that with "patience" the RBS price could rise above 50p, Talbut said it was "unlikely the government will see a profit in the foreseeable future".
guardian.co.uk
The experts – including investment bankers and senior fund managers – said that attempts to break up RBS might reduce the amount that taxpayers receive for their stakes.
With the share prices of both banks trading at less than half the £65bn that the government used to buy shares, Manus Costello, a managing partner of City broker Autonomous, said it was the wrong time for any sell off.
He pointed out that none of the bank analysts had a share price target for RBS above the 50p average price at which taxpayers bought their 83% stake. RBS shares were trading at 22p on Tuesday.
The political furore in January surrounding a £1m bonus for its chief executive, Stephen Hester, had raised concerns among investors.
Hester waived the bonus and admitted that he had considered resigning. Robert Talbut, chief investment officer of Royal London Asset Management, said that holding on to key staff was "going to be significantly inhibited if they do not believe they can be paid at a commercial rate".
Richard Buxton, head of UK equities at Schroders, described the management team at RBS as "doing a fantastic job" but added that Hester could not be paid a "commercial rate".
Keith Skeoch, chief executive of Standard Life Investments, said that while public anger towards banks was understandable, it could have an impact on the share price.
Attempts to sell off a sizeable stake to sovereign wealth funds in Abu Dhabi met with a mixed response from investors. Buxton said he would be disappointed if there was a sale to a sovereign wealth fund which was then able to a make a "lot of money".
He added: "If you are prepared to be patient you don't have to give the taxpayers' money to a sovereign wealth fund."
The Treasury select committee also asked about the feasibility of a plan, first raised by Liberal Democrat MP Stephen Williams, to hand shares to 45 million individuals on the electoral roll.
Williams said: "This is a very popular idea which would give the public something back for bailing out the banks." Graham Webb of the advisory group Solid Solutions revealed that he and bankers from Barclays Capital had been working on the give-away plan, devised by Portman Capital.
He likened it to the demutualisation of Halifax, when 8 million people were handed shares, but three or four times larger.
The bankers argued that share sales could start below the 50p break-even point in RBS – an argument that has already been made by UK Financial Investments which controls the taxpayer stakes in the banks.
Adam Young, co-head of equity advisory at Rothschild, said that a "good strategy is to start the disposal at the lower price and build it up over time", although it could take five years to privatise RBS.
While Buxton reckoned that with "patience" the RBS price could rise above 50p, Talbut said it was "unlikely the government will see a profit in the foreseeable future".
guardian.co.uk
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