Massaging bank-bailout figures doesn’t relieve the pain

YOU may not associate Rothschild with alternative therapy, but its massaging of the bank-bailout numbers beats the best spas.

Firstly, it opts to blend the good investments (Lloyds, the former Northern Rock and Bradford & Bingley) with the bad (RBS) into one pot to get a nicely-scented overall figure showing that we’ve made a tidy profit on the deals.

Investing taxpayers’ money, you see, is like shopping for a dinner party: if you get a bargain on parma ham at Lidl, you should pay over the odds in Harrods for the melon.

Secondly, the figures fail to include the cost to the Government of funding the £108 billion of interventions. As every banker knows, there’s no such thing as free money.

Thirdly, Rothschild counts fees banks paid for the state guarantees we gave them as pure profit without giving any account of their cost to the nation. Sure, this too-big-to-fail insurance (which allowed the sickly banks to borrow more cheaply than they otherwise would) didn’t cost the country any actual cash, but it was still a liability. More importantly, Rothschild gives the impression that fees the banks paid for these guarantees were a return on the cash we spent on the shares.

So, Rothschild says, we “injected” £45.8 billion into RBS (that’s the cost of buying the shares). These are now worth only £32.4 billion. But after you throw in the fees for the guarantees and a few other bits, the loss comes down to a mere £7.2 billion. That was the figure used by headline writers this morning.

However, the real apples-with-apples loss — the amount we paid for the shares and their value now, as we prepare to sell them, is a far less palatable £13.4 billion. That is the figure we should contemplate as we decide whether to sell up now.

Little wonder the figures needed a rubdown.

Good news on RBS

THE best news from Mansion House last night was in the gossip: bankers predict it will be five to seven years before the entire RBS stake is sold.

This may not be what RBS management wants to hear, but a lengthy, staged sale is absolutely vital to ensure a good outcome for taxpayers.

That way, unlike with Royal Mail, there is a far better chance of avoiding the galling prospect of a state-owned asset being largely sold at what transpires to be too low a price.

It would also ensure that the country gets to share in more of the upside from the remainder of RBS management’s restructuring programmes.

Lest we forget, this includes the sale of its 40.8% sale of the giant Citizens bank in the US and, if you listen to some analysts, a potential £10 billion share buyback in 2016.

That’s worth the taxpayer sticking around for.