RBS to Be Fully Nationalized?

LONDON -- According to the Financial Times, the U.K. government is having a powwow to consider buying out the remaining shares in Royal Bank of Scotland (LSE: RBS.L  ) that are still in private hands, with a view to boosting the bank's lending to businesses.

RBS is currently 82% owned by taxpayers, and the FT estimates that the acquisition of the remaining 18% would cost in the region of 5 billion pounds, in addition to the 45 billion pounds already invested in saving the bank.

The other bailed-out bank, Lloyds Banking Group (LSE: LLOY.L  ) , is only under 41% government ownership, so pursuing all-out ownership of that one would be a good bit less realistic.

Forced lending
The problem is that the government's urging of banks to increase their lending to businesses, coupled with a lengthy program of quantitative easing and the release of cheap cash to banks specifically for that purpose, has not achieved its targets, and smaller firms are still struggling to get the cash they need.

Forcing RBS to crank up its lending is seen by some as the only realistic alternative at the moment.

Chancellor George Osborne is reported to be opposed to a full buyout, as that would land taxpayers with 100% of the bank's debt liability, quite a bit of which is toxic -- but we're 82% in that soup already, so it's not likely to make a great deal of difference.

If the mooted plan does go ahead, there will surely be scrutiny from banking regulators -- a government-owned bank offering cheap loans could potentially raise some competition headaches.

We shall have to wait and see if the FT is right on this one.

Finally, the banking sector is still a risky one to invest in, so if you want something safer, Neil Woodford is an acknowledged expert on investing in solid dividend-paying companies -- the free Motley Fool report "8 Shares Held By Britain's Super Investor" takes a look at some of his major holdings. Click here to get your free copy, while it's still available.

Investing is by no means easy in today's uncertain economy. That's why we've published "Top Sectors for 2012" -- our guide to three favorable industries. This free report will be dispatched immediately to your inbox.

Further Motley Fool investment opportunities:

Alan does not own any shares mentioned in this article. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1969471, ~/Articles/ArticleHandler.aspx, 12/22/2014 5:09:10 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement