The Trea­sury must set RBS free as cor­ner is turned

The Sunday Telegraph - Money & Business - - Business - Ben Mar­low

Ten long, painful years. Hard to be­lieve but the an­niver­sary has just passed since the im­plo­sion of two hedge funds that were part of Bear Sterns trig­gered the fi­nan­cial cri­sis, un­leash­ing a decade of mis­ery that con­tin­ues to be felt to­day. Yet, as this du­bi­ous mile­stone passes, the slow and hugely ex­pen­sive turn­around of Bri­tain’s bank­ing sys­tem may fi­nally be in sight af­ter an­other ma­jor hur­dle was re­moved last week.

The ap­proval of Brus­sels for a small busi­ness lend­ing scheme that al­lows RBS to avoid the forced sale of its Wil­liams & Glyn branches is a hugely sig­nif­i­cant vic­tory for the bank.

An at­tempt to dis­pose of the as­sets proved to be one of the most costly time-wast­ing ex­er­cises seen in a long time, so com­mon sense has fi­nally pre­vailed on that front. And any­thing that helps to boost small busi­ness lend­ing should be warmly wel­comed.

More im­por­tantly, it means just one re­main­ing ob­sta­cle stands in the way of RBS’S re­turn to full pub­lic own­er­ship, an event that would truly draw a line un­der the post-cri­sis years.

Hav­ing agreed a £4.2bn set­tle­ment with the US reg­u­la­tors over the sale of toxic sub-prime mort­gages ear­lier this month, the re­main­ing is­sue is a sep­a­rate fine from the Depart­ment of Jus­tice over the same sub-prime mort­gage ac­tiv­i­ties in which RBS was one of the big­gest play­ers as the fi­nan­cial cri­sis un­folded.

The wait is likely to drag on. With the DOJ in dis­ar­ray un­der Don­ald Trump, man­age­ment are un­able to get any sense of the size or the tim­ing of the penalty.

The un­cer­tainty con­tin­ues to weigh on RBS’S share price, par­tic­u­larly as es­ti­mates of the pay­out range from £4bn to £15bn, and the Trea­sury’s ap­petite for sell­ing down its stake.

RBS won’t be drawn on what it thinks the fig­ure will be, not even pri­vately, but an­a­lyst con­sen­sus leans to­wards the lower end of a range, be­tween £5bn and £6bn. With roughly £3bn left in the bank’s com­pen­sa­tion pot, a fur­ther £3bn in pro­vi­sions may be re­quired to draw a line un­der the past.

The bank is genuinely in the dark about the Trea­sury’s think­ing but that isn’t stop­ping it from look­ing to the fu­ture. Man­age­ment is pre­par­ing to move on, hope­ful that this fi­nal mat­ter can be re­solved by the end of the year, and that it is the cat­a­lyst for the Gov­ern­ment to be­gin sell­ing its shares.

Let’s hope they are right. With RBS’S shares cur­rently lan­guish­ing around the 250p mark, any hope of ex­it­ing at the magic 500p profit mark evap­o­rated long ago.

Mean­while, de­spite an eye-wa­ter­ing bill from wind­ing down Fred Good­win’s dis­as­trous em­pire-build­ing and a se­ries of mis­de­meanours, the core of RBS is genuinely strong. Even pos­si­ble ac­qui­si­tion op­por­tu­ni­ties are be­ing talked about pri­vately.

With sev­eral of Ire­land’s banks in­clud­ing Per­ma­nent TSB ex­pected to be put up for sale, RBS is weigh­ing sev­eral pos­si­ble moves.

A new sense of op­ti­mism has been build­ing around Bri­tain’s big banks since Lloyds was re­turned to pri­vate own­er­ship back in May this year.

Bar­clays, too, is look­ing to the fu­ture. The Gov­ern­ment should do the same and get on with free­ing RBS from the arms of the tax­payer.

‘Any­thing that helps to boost small busi­ness lend­ing should be wel­comed’

Too big to go up in smoke?

COM­PA­NIES out­side the fi­nan­cial sec­tor are rarely deemed “too big to fail”.

In the UK, there has been the odd ex­cep­tion. Reg­u­la­tors helped save Thomas Cook back in 2012, con­cerned that thou­sands of cus­tomers would be stranded abroad.

And when HMV went bust the fol­low­ing year, the big mu­sic la­bels stepped in to en­sure it sur­vived, des­per­ate to avoid hand­ing fur­ther power to the likes of Tesco and Ama­zon.

Along with hol­i­days, DVDS, and CDS, we can now add cig­a­rettes to the “pro­tected” list. As we re­veal to­day, ef­forts are be­ing stepped up to res­cue the coun­try’s largest to­bacco dis­trib­u­tor, Palmer & Har­vey.

The com­pany’s de­te­ri­o­rat­ing fi­nan­cial sit­u­a­tion has cig­a­rette mak­ers Ja­pan To­bacco and Im­pe­rial To­bacco on red alert. These multi­na­tion­als are loathe to own a com­pany mak­ing tiny mar­gins de­liv­er­ing cig­a­rettes but cru­cially it owes them hun­dreds of mil­lions, and the pair need to pro­tect a vi­tal part of the sup­ply chain.

My bet is Palmer & Har­vey sur­vives with a lit­tle help from some im­por­tant friends.

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