Tuesday, 25 August 2009

What next for the banks?

The positive financial news from the banking sector which has come out over the last few weeks (Barclays 8% rise in first half profits, Goldman Sachs making record amounts of dosh) certainly seems to suggest that the sector is beginning to get back on its feet. It is certainly going to take a little longer for the worst cases to record performances like that, but it is clear that we can now begin to focus on the medium to long term futures of our failed banks rather than worrying about whether they are going to announce another £20 billion or so in asset writedowns.

In fact, my back of a fag packet calculations would suggest that, at current market prices, the Government is set to make a tidy profit on its shareholdings in Lloyds (43%) and RBS (98%). The question now is: how and when does the Government sell its shareholdings? The answers are ‘very carefully’ and ‘not yet’. Certainly pumping that amount of stock into the market in one go is out of the question so we are probably going to see a drip, drip of placings with institutional investors in the secondary market over the next 3-5 years.

You can’t help but wonder though whether a more equitable arrangement would be for those that saved the banks to truly benefit from the upside, namely you and me. What about a return to the privatisations of the mid-80s and an invitation for us all to fill our boots like we did with the British Telecom and British Gas? We could even have a “Don’t tell Sid” TV advertising campaign updated for the new millennium.

It would certainly make for a very populist policy for any political party to take into the next election campaign and would seem to sit very well with the Conservative Party’s publicly expressed aim of breaking the link between retail and investment banking.

Oh and there’s another very good reason to go truly public and have oiks like me at their AGMs - the banks would hate it!


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