Royal Bank of Scotland Group Plc slumped by the most in two decades in London trading on concern the government may have to take full control of the bank after forecasting the biggest loss ever reported by a U.K. company.RBS will not be the last bank nationalized, either. So far the US is resisting nationalizing banks. I don't think that resistance is going to last much longer. The entire sector is already virtually nationalized. When TARP II fails, what then?
The stock dropped 67 percent, the most since September 1988, to 11.6 pence, paring the Edinburgh-based lender’s market value to 4.6 billion pounds ($6.7 billion).
“Nationalization at zero value is implicit in the price,” said Derek Chambers, an analyst at Standard & Poor’s Equity Research Ltd. who has a “hold” rating on the stock. The stock price “is an option on the vague chance that it doesn’t get nationalized.”
RBS said today it may post a loss of as much as 28 billion pounds this year, surpassing Vodafone Group Plc’s 22 billion- pound net loss in 2006. The government offered to exchange its preference shares in the bank for ordinary stock, a move that could increase its stake to 70 percent from 58 percent.
Analysts speculated today the government may eventually take full control of the 282-year-old Scottish lender. “The market is pricing in the risk of full nationalization for RBS,” said Sandy Chen, an analyst at Panmure Gordon & Co. who has a “sell” rating on the stock. “It’s not an RBS-specific issue. The mixture of deflation and de-leveraging is toxic for bank shares.”
I forsee a government takeover of a number of banks, most likely Citigroup, before the 4th of July. We'll see. I just don't see anything Obama can do before things descend to the near-panic level.
Perhaps then the government will do something...of course by then, what will they be able to do other than printing trillions to cover the losses?