Time to Buy Banks?

14th May '11 by Isaac

3 comments 7896 reads

Treasury lines up £5bn share sale at RBS

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8514172/Treasury-lines-up-5bn-share-sale-at-RBS.html

I've always felt for the banks to have a sustained rise HMG would have to reduce it's stake and only once a large part of their stake is sold down will the banks recover properly.

Pyad did an excellent article on banks recently :

http://www.fool.co.uk/news/investing/company-comment/2011/05...

http://www.fool.co.uk/news/investing/company-comment/2011/03/24/possible-bank-value.aspx

15/07

RBS

Core tier 1 ratio 6.3pc
Deferred tax assets €10.2bn
(at 2012 in adverse scenario)

Net sovereign debt exposures
Greece €1.15bn
Ireland €402m
Italy €4.6bn
Portugal €208m
Spain €379m

Lloyds

Core tier 1 ratio 7.7pc
Deferred tax assets €9.7bn
(at 2012 in adverse scenario)

Net sovereign debt exposures
Greece 0
Ireland 0
Italy €32m
Portugal 0
Spain €62m

Barclays

Core tier 1 ratio 7.3pc
Deferred tax assets €6.2bn
(at 2012 in adverse scenario)

Net sovereign debt exposures
Greece €93m
Ireland €407m
Italy €2.9bn
Portugal €1.17bn
Spain €5.5bn

HSBC

Core tier 1 ratio 8.5pc
Deferred tax assets €3bn
(at 2012 in adverse scenario)

Net sovereign debt exposures
Greece €919m
Ireland €134m
Italy €3.86bn
Portugal €320m
Spain €636m

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8641514/European-stress-tests-banks-set-for-chaos-Monday-after-nine-fail.html

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nigelpm

15th May '11

Sorry, I don't get the logic here.

You are suggesting to buy banks because the govt are selling?

Isaac

Precisely Nigel.

The government selling is putting a line under the financial crisis imo. It also means the government has less power to bully a bank into doing x, y & z & the free markets can work again. Also a potential overhang of the government stake would clear.

RBS & LLOY are unlikely to go bust imho, they are still near their all time lows and eventually we will come out of this recession and the banks will make profits, not as high as 2007 but they will still be profitable & will eventually start paying dividends.

Imho anyone making an Investment at current prices in the banks on a 5 year basis will make money.

Dyor

Hi Isaac,

I wholeheartedly agree with Paras 2 and 3 but only parts of para 1.

The govt bought a stake in the banks to ensure RBS didn't go bust - apparently they were about 3 hours away from that as investors in the far East and US were pulling their investments out in droves.

That was their only intention for investing. Their selling doesn't really change anything as I see that.

The crisis is past - whether the govt hold a stake should have no bearing IMHO on whether you think banks are a good investment or not.

I should add I think they are a good investment and I've been buying LLOY of late.

Time to Buy Banks?

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Isaac

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