UK may never make profit on RBS and Lloyds

Tim Wallace
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HUGE pressures from regulation and slow growth mean the government may have to wait until 2020 to have evan a chance of recovering the bank bailout costs, UK Financial Investments warned yesterday.

The head of the body that manages the shareholdings in Lloyds and RBS told MPs it aims to maximise value for the taxpayer, but may not be able to make a profit.

“Both banks’ chief executives have articulated 2013 as ideally the last year of restructuring – after that they will look more like normal banks, with earnings on a path to dividends,” UKFI chief executive Jim O’Neil told the Treasury Select Committee.“But it is not in taxpayers’ interests to set a deadline or time for the sale, as that could mean it is perceived as a forced seller. Most importantly, what will happen to the economy and when will regulations settle down.”

As many incoming regulations are still being formed and are only to be implemented by 2019, that means shares may only fully recover at the start of the next decade – assuming no other shocks hit the sector.

O’Neil also reiterated pressure on RBS to consider the future of its US business Citizens and reduce the size of its investment bank. Citizens and its subsidiaries could fetch more than £9bn, analysts have estimated.