We should all be interested in the Government’s manoeuvres with the banks. A good receipt in a few years is important to the nation's finances. If an unwise move is made now, Gordon Brown’s “car boot sale” might more resemble the “closing down sale” so lampooned in Private Eye. It really matters to us all now – and in ensuring our children’s futures are unscorched.
The Government is planning to force RBS to offload its insurance division, including Direct Line, Churchill and Green Flag. Meanwhile RBS-branded branches in England may be sold off as Williams and Glyn Bank. We also learn that RBS is also under pressure to shed some of its investment banking units. Lloyds too will likely have to offload some of its operations - including the Intelligent Finance internet banking division.
Now here’s the key question. When is the best time to sell off insurance, retail banking and investment banking businesses? Sure as eggs, now is not the time to sell of investment banking. Investment banking will likely be a growth story that would fetch a very good price in a few years time. Retail internet banking is also a growth story. Traditional retail banking resembles a utility in nature – except right now market sentiment does not favour it for a good sale price. Insurance has certainly been more stable, but share prices suggest now would not be a great time to sell. The insurance sector was far higher in 2007 and likely to be back to stronger levels two or more years from now.
The best time to sell such businesses is not likely to be now – and may not be next year either. The difference could be very substantial. Any move to stuff these assets into Gordon Brown’s car boot must be viewed with grave caution and substantial concern. Brown has form when it comes to selling at the bottom of the market and the nation simply cannot afford a repeat of the Gold sale fiasco.
