” Mr Banker, would you please move your head just a little bit to the side. It appears to be blocking your backside.”
One of the conditions of the Government’s bailout of the banks was that no dividends were to be paid until any loans (the debts to the taxpayer) had been repaid.
It was that condition which caused the participating banks’ shares to be dumped this week. That caused quite striking drops in share prices. In fact, they all nose-dived.
HBOS shares fell so much that it is pretty definite that Lloyds-TSB will want to renegotiate the terms of their proposed takeover. At those prices – so would you! It also begs the question – does HBOS need to be taken over. I know that it’s a small price to pay to wipe the smile off Alex Salmond’s face but as long as Gordon Brown is in the mood to over-mortgage the country (the United Kingdom – not the Caledonian “republic”), perhaps HBOS is best left alone. Otherwise Scottish bank notes may have Eric Daniels’ mugshot on the front. Eeek!!
Currently, the majority of bank shares are being sold by petulant institutional investors in the full knowledge that their actions will cause prices to drop – and it looks like a coordinated effort which is designed to persuade the government to cave-in and agree to some sort of dividend payment.
Once the government has clarified what it intends to do and (inevitably) agrees to postpone the taxpayers “charge” over dividends – watch bank prices increase as institutional buyers pile back into the market.
Financial institutions know that the government’s biggest fear is what is currently shaping up to happen on the stock markets and that is the inevitable mega-fall. Financial institutions are not-only still manipulating the market but treating the Treasury and the Bank of England like idiots.
Incidentally, has the Treasury or the BoE carried out detailed audits of the banks? Do they know the exact extent of their “losses”?
There is still a total lack of numbers – probably because no-one has asked for them.
Black Friday tomorrow? I’m only asking because it’s about time we had the romance of something black. Unfortunately, the markets are so volatile that closing prices nowadays are a matter of timing and a reflection of current confusion. For instance, yesterdays Dow was rattling up and down at such a rate that the closing-bell value could have ended anywhere between 3800 and 4050, It just happened to end on a high. Of course the high finish will influence the Asian markets which will show the inevitable initial gains – and so it will go on.
Whatever happens, it will be interesting to watch shares belonging to the “silent” banking institutions (those which been keeping a low profile over the last month).
And prepare for an assault on insurance companies.
Even Mr Peston might mess himself.