The other day Bank of England Governor Andrew Bailey was musing on why UK bank share prices are so weak.
A “puzzle”, he said. Didn’t investors realise what great value bank shares are?
A stat the governor may not know: Since the start of the year the value of shares in Barclays, Santander, Lloyds, NatWest and Close Brothers are down by a combined £10 billion.
That’s tricky for the government, which wants to offload its remaining 35% stake in NatWest, perhaps as soon as the summer, in a supposed “tell Sid” deal.
If the governor is right that these shares are cheap, then Sid can buy in at a low valuation and watch as Andrew Bailey turns out to be better at picking shares than setting interest rates.
Alternatively, maybe the shares are priced perfectly correctly for an economy in recession where consumer confidence has been biffed.
If big investors don’t fancy NatWest shares, why should we?
Chancellor Jeremy Hunt says he wants to get “full value for money” for the stock. So, he’s not going to flog them at a discount.
A better plan, especially since we have paid for these shares once already when we bailed out what was then Royal Bank of Scotland back in 2008, would be to give us those shares for free.
That’s a logistical issue, but perhaps also a vote winner for a government desperately in need of some.
A third of NatWest, even at today’s theoretically depressed price, is still worth about £7 billion.
How about we get the Bank of England to buy that stake and give the money to Jeremy Hunt.
Then when the shares rise, the Bank can sell that stock into the market at a profit. If that takes a while to come to fruition, so what?
