Taxpayers were given a sobering reminder yesterday of quite how disparate the fortunes of the two state-backed lenders have become after Lloyds posted figures showing profits doubled in the first quarter.
No wonder the government has found reducing its stake in Lloyds from 43 per cent to less than two per cent a relatively straightforward process. Meanwhile, it still holds a 72 per cent share of RBS, which yesterday announced a settlement with investors in a lawsuit stemming from its rescue in 2008 - although quarterly results published today are expected to show it has swung into profit for the first time since 2015.
Speaking on City A.M.’s Unregulated podcast earlier this week, Virgin Money chief executive Jayne-Anne Gadhia, who ran RBS’ mortgage division under Fred Goodwin, admitted many of the lender’s problems stem from a spending spree before its bailout.
“It just became too big to control. The out of control-ness, in my view, led to a lot of problems.”
Tesco is a case in point: the company spent the first part of this century steadily absorbing everything in its path, from cafes to restaurant chains to a video streaming service. One of the first actions of current chief executive Dave Lewis, appointed to turn it around, was to sell off all its extraneous parts and move its focus back to retail. The strategy has worked: earlier this month it posted its first sales rise in seven years.
Can RBS, whose subsidiaries include NatWest and Ulster Bank, as well as lender-in-waiting Williams & Glynn, pull a similar move?
Even if it can, the time it takes may be too long for taxpayers. Earlier this month Philip Hammond admitted he was considering selling the government’s stake at a loss. Such a move would be wise. The longer the state’s ownership persists, the longer taxpayers will be reminded of the era of poor decision making that characterised the financial crisis. Better to rip off the plaster quickly.