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Royal Bank of Scotland (RBS) on Sale for 12pence

Companies / Banking Stocks Jan 19, 2009 - 11:10 PM GMT

By: Nadeem_Walayat

Companies Best Financial Markets Analysis ArticleThe Royal Bank of Scotland's share price crashed by 66% on dreadful results. The latest crash in a string of price crashes during the past 18 months has seen RBS go from one of the worlds biggest banks priced at £7.20 per share to a penny stock that has been kept out of bankruptcy by the ever escalating scale of government capital injections and loans, with the latest cash handout taking the Governments stake to 70% and therefore defacto nationalisation of the Bank in all but name.


Back in 2007, RBS already had a unhealthy exposure to the US subprime mortgage backed securities that have blown up in mst of the worlds banks faces. However RBS went that one step further on the route towards banking disaster in that despite the credit freeze, the bank STILL proceeded to takeover ABN Amro AFTER the Northern Rock went bust in September 2007. The RBS consortium paid £60 billion for ABN amro which compares against RBS's current market capitalisation of less than £4 billion.

The losses reported to day include £20 billion loss on ABN Amro loans and a further £8 billion of bad debt losses which include £400 million that disappeared in Madoff's Ponzi scheme that takes RBS total current losses to £28 billion.

Meanwhile the government flushed another £5 billion of tax payers money down the RBS toilet as it converted £5 billion of preference shares into ordinary shares which lifted its stake from 58% to 70% and further dilutes existing shareholder values. Compare this move against the value of the whole bank of less than £4 billion and you get a taste of what this means for UK Tax payers who are being presented with mis-information that they could make a profit at some point, just as the £100 billion committed to Northern Rock much of which has disappeared into its defaulting mortgage book.

The government took the opportunity to burn a further £200 billion of tax payers money in additional to the already committed £800 billion. My warnings of early 2008 of hundreds of billions being wasted have now seen tax payer liabilities pass the £1 trillion mark on route towards the inevitable crash in sterling that will result in the hyperinflationary bankruptcy of Britain which my next analysis will elaborate upon.

By Nadeem Walayat
http://www.marketoracle.co.uk

Copyright © 2005-09 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on the housing market and interest rates. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 250 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

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