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Analysts' forecasts for Lloyds and RBS share prices may worry George Osborne Analysts' forecasts for Lloyds and RBS share prices may worry George Osborne
(4 months later)
Amid speculation that George Osborne is keen to kick off share sales in bailed-out Lloyds Banking Group and Royal Bank of Scotland, here's something for the chancellor to mull over.Amid speculation that George Osborne is keen to kick off share sales in bailed-out Lloyds Banking Group and Royal Bank of Scotland, here's something for the chancellor to mull over.
According to figures compiled by Bloomberg, the target prices City analysts have set – where they think the shares might be trading in the next 12 months – are 54p for Lloyds and 321p for RBS.According to figures compiled by Bloomberg, the target prices City analysts have set – where they think the shares might be trading in the next 12 months – are 54p for Lloyds and 321p for RBS.
These forecasts may worry the chancellor, who has sent clear messages in recent months about the prices he regards as breakeven for the two stakes: 61p for the 39% stake in Lloyds and 407p for RBS.These forecasts may worry the chancellor, who has sent clear messages in recent months about the prices he regards as breakeven for the two stakes: 61p for the 39% stake in Lloyds and 407p for RBS.
Until March, neither of these prices had been closely watched. Instead 73.6p and 502p were the ones the City had believed would be used to gauge whether the sale was at a profit or a loss.Until March, neither of these prices had been closely watched. Instead 73.6p and 502p were the ones the City had believed would be used to gauge whether the sale was at a profit or a loss.
The lower prices are the ones at which the shares were trading when the taxpayer bought up stakes, rather than the actual prices paid. As Ian Gordon, banks analyst at Investec, explains, the government paid 500p for shares in RBS in December 2009 when the shares were trading at 292p.The lower prices are the ones at which the shares were trading when the taxpayer bought up stakes, rather than the actual prices paid. As Ian Gordon, banks analyst at Investec, explains, the government paid 500p for shares in RBS in December 2009 when the shares were trading at 292p.
At today's prices there is some cause for the chancellor to cheer if he uses his new methodology. Lloyds is above 61p, albeit by a whisker, although RBS is still languishing at 345p.At today's prices there is some cause for the chancellor to cheer if he uses his new methodology. Lloyds is above 61p, albeit by a whisker, although RBS is still languishing at 345p.
Yet among all the options being thrown at the chancellor, it is far from clear what his strategy is. A variation of a plan first supported by the Liberal Democrats to hand shares to taxpaying Britons? Selling off a stake to a sovereign wealth fund? Placing shares on the market to big City institutions alongside a "tell Sid"-style tranche for private investors?Yet among all the options being thrown at the chancellor, it is far from clear what his strategy is. A variation of a plan first supported by the Liberal Democrats to hand shares to taxpaying Britons? Selling off a stake to a sovereign wealth fund? Placing shares on the market to big City institutions alongside a "tell Sid"-style tranche for private investors?
It does seem clear that he has ruled out the full nationalisation of RBS – even though this may be recommended by Andrew Tyrie's commission on banking when it reports in the coming weeks.It does seem clear that he has ruled out the full nationalisation of RBS – even though this may be recommended by Andrew Tyrie's commission on banking when it reports in the coming weeks.
The questions are clearly being considered. The obvious time to tell the City of the answers would be the annual Mansion House speech next month.The questions are clearly being considered. The obvious time to tell the City of the answers would be the annual Mansion House speech next month.
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