Partly nationalised UK banks – Royal Bank of Scotland and Lloyds

In England, the UK government owns 84% of Royal Bank of Scotland. The shares in this bank need to be 50 pence each to let the taxpayer break even. The shares ended 2009 at 29.2pm flagging a loss of £20 billion to Joe Public.

Lloyds banking group is 43% owned by the UK government. Shares in Lloyds need to be 74 pence which is the average buy-in price according to the UK National Audit Office to allow the government cover costs. Shares in Lloyds were 50.69p at year end indicating a current loss of £6 billion. Lloyds had a successful £13.5 billion rights issue towards the end of the year which saved the government further investment.

The National Audit Office calculates that for every 10p increase in RBS shares the taxpayer gains £9 billion and for a 10p rise in Lloyds, there is a gain of £3 billion.

In money terms, the British taxpayer put £45.8 billion in RBS and £20.9 billion into Lloyds and is currently nursing losses of £26 billion.

The UK Financial Investments looks after the public shareholding and the question is when and whether they can off-load these shares into the market at break even or a profit for the taxpayer. Forecasters record in finance is so bad that any further comment is speculative in the extreme. Last year the low point for RBS was 10p and 16p for Lloyds. The high was 58p and 85p respectively in the autumn. So I believe that the project is salvable.

Irish banks will go through a similar trajectory especially so near neighbour experience is relevant.