Comment: Investors tested amid glut of share sales

Terry Murden. Picture: TSPL

Terry Murden. Picture: TSPL

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THE UK government fired the starting pistol on the privatisation of Lloyds and Royal Bank of Scotland last week by inviting advisers to tender for the work, a process that will be made more complicated by some unfinished business.

This includes the sale of branches under orders from the European Commission. Lloyds must dispose of 632 branches, including the Cheltenham & Gloucester outlets, repackaged under the name Project Verde, while RBS is attempting to offload 315 branches in a project known as Rainbow.

Both banks have struggled to complete their respective sales – RBS to Santander and Lloyds to the Co-op – after the buyers pulled out. With few interested parties, or potential acquirers with the right credentials, it looks likely that the two businesses are heading for stock market flotations.

But therein lies another problem. Verde and Rainbow are each valued at about £1 billion and are expected to come to market in the next year or two. That will coincide with the flotations of the taxpayers’ stakes in Lloyds and RBS, which are likely to be the biggest on record.

Add in the expected flotation of Virgin Money and possibly Santander’s UK business and investors are being asked to provide an awful lot of capital in a short space of time.

No wonder RBS is looking seriously at first selling a substantial stake in the Rainbow business to strategic investors who would then stay on as a dominant force in the floated company.

The bank is said to be close to making a decision, possibly this month, and is talking to three consortia. But on past form, there is no certainty that a deal will be forthcoming.

Cala gives pointer to a house market recovery

there have been a few signs of an upturn in the housing market and figures from Cala Homes suggest the momentum may be growing.

Completions are up and profits are expected to hit a record. The trading update is a pointer to the wider market with some of Britain’s biggest housebuilders reporting later this week. Persimmon rejoined the FTSE 100 last month after a five-year absence.

This will be good news for frustrated sellers stuck in a long slump that has also shaved values and is preventing homeowners from relocating. In particular, the rise in first-time buyers will help give the market some traction from the bottom.

Some of the gains have been attributed to government schemes such as Funding for Lending, which is making cheap money available to lenders, and subsidies aimed directly at the homes market.

There are some who worry that these may contribute to another bubble. For now, though, they are helping give the sector a much-needed lift.

Carney needs quick win to retain City loyalty

MARK Carney turned up for his first day as Governor of the Bank of England yesterday and got the sort of media reception normally reserved for royalty and rock stars.

Maybe he will bring a touch of both to a financial services sector that needs to restore its tarnished reputation.

But after telling us everything from the suit he wore to his choice of the Tube to get into the City, his followers will soon start to question what he is doing. How long before the honeymoon is over? I’ll be generous and give him until Christmas.

Twitter: @TerryMurden1

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