Jim Armitage: Binge on Lloyds has curbed appetite for more bank sharesComments Off on Jim Armitage: Binge on Lloyds has curbed appetite for more bank shares
Chancellor George Osborne’s success in stuffing pension funds with taxpayers’ Lloyds shares is having an uncomfortable side effect: indigestion.
The Treasury has for 18 months been filling institutional investors’ gullets like foie gras geese with the Lloyds shares nationalised in the financial crisis bailout.
As a result, sated with £16 billion of this extra stock in the dominant High Street bank, their appetites for investing in smaller, riskier rivals coming to the market are much diminished.
What hunger there was for smaller lenders was satisfied with Lloyds’s sale of its TSB division. Thanks to the size and geographical spread of that business, its float was relatively popular.
The same can’t be said for Clydesdale, a small, PPI scandal-stricken group of branches in the North and Scotland which have been up for sale on and off since 1999.
So it is that its owners at National Australia Bank have today had to set a price range some £500 million lower than we were originally led to expect.
The float now looks likely to be priced at as little as half-to-0.6% of the book value of its assets.
Given that bidders are said to have offered double that in recent years and been rebuffed, that’s a pretty shocking reflection on NAB’s management.
If you were feeling charitable, you could say this yard-sale valuation is little surprise given the choppy stock market.
But it’s far from clear that NAB would have had much more luck if they’d held off until calmer waters prevailed. The state of the markets could end up providing some useful cover if the float flops.
The success — or otherwise — of Clydesdale could dictate the flotation fortunes of tiny Metro Bank and RBS’s Williams & Glyn division, also set to come to market this year.
Metro and the billionaire US hedge funders who own it will argue that, being a young thruster launched for the 21st century, it is a wholly different investment prospect to the auld Clydesdale, which was formed in Glasgow in 1838.
W&G, when it finally gets its flotation boats in a row, will declare itself big enough, and adequately spread across the UK to challenge the big boys.
The truth, though, is that investors will be cautious at the prospect of backing either.
The strongest shares up for sale in the sector — those of Lloyds and TSB — have largely been and gone.
Mother of inventions
How heartening that Imperial Innovations has won an initial £25 million from Europe to seed a £200 million fund to invest in University College London’s life-changing inventions.
Would such largesse be available post-Brexit?