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eric pebble

Treasury Forecasts £77bn Loan Losses For Lloyds And Rbs

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If you read the article in full and absorb the numbers what is being said is actually far far worse.

"Or to put it another way, the Treasury would not and will not incur a penny of loss on the Asset Protection Scheme unless and until Royal Bank of Scotland suffers £42.2bn of additional eye-watering losses on those £325bn of loans and investments and Lloyds incurs £35.2bn of losses on its £260bn of insured assets."

So RBS would have to take 42.2bn losses on a say 325bn portfolio. So that's approximately 13% losses. Think about it though, that's not quite how it works. That would assume the house was given away for nothing in 13% of cases doesnt it?

Maybe the truth is therefore 20%+ of distressed assets maybe a heck of a lot more? That would be terrible news for the house price crash (or good depending upon perspective I guess).

Crunching some numbers 42.2bn = 280,000 home at 150K a piece (assuming total loss). If the houses sell at 50% loss then thats a half millon plus homes (maybe considerably more) isn't it.

I would like someone to challenge the maths on that. Get a view of the scale of the inferred problem. Sounds huge expected volumes if this were to come true.

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So RBS would have to take 42.2bn losses on a say 325bn portfolio. So that's approximately 13% losses. Think about it though, that's not quite how it works. That would assume the house was given away for nothing in 13% of cases doesnt it?

Only if their assets are not leveraged, though I have no idea if they are. For example, they might hold a bunch of CDOs rather than vanilla mortgages.

In any case, the taxpayer getting away with paying just £25e9 for the protection would be a remarkably benign outcome. So it won't happen :-) Remember that estimate *is* geared whether or not the assets are, and could change rapidly. As the article puts it:

However it adds that the estimate "could be subject to substantial revision (up or down) as further due diligence reports are completed" and that "altered economic and market conditions would clearly also effect estimated losses" (doh!).

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Presumably those "loans", "investments", and "insured assets" include commercial property which is already down 50% from peak and business finance some of which is already down 100%?

Good point. It may include commercial property, but presumably not business finance though? Would love to know where the figures come from. I would expect higher figures if this lot were included in the grand total of lending. Seems small otherwise.

To quote wikinvest (may give some clue) for RBS

"UK Retail and Commercial Banking (36.5% of Income)

The UK Retail and Commercial Banking segment provides retail, commercial, and corporate banking products to U.K. citizens. UK Retail serves over 15 million personal customers and holds 26% market share.[6] UK Retail market share for mortgage lending increased 2% to 19%.[6] From 2007 to 2008, UK Retail and Commercial Banking income increased 2%"

Edited by Redcellar

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Treasury forecasts £77bn loan losses for Lloyds and RBS

http://www.bbc.co.uk/blogs/thereporters/ro...7bn_loan_l.html

Is it just me, or has the world gone stark raving mad?? :unsure::blink:

Why are "people" so inured to Billion (rhetorical statement). I can remember when our "leader" would, as chancellor, stand proudly/shamelessly in front of Parliament declaring how many extra Million(s) he would be spending on project x or y and people would cheer loudly or gasp in dismay. Now the mention of Millions elicits little more than shrug.

Ignorance would indeed appear to be bliss for many.

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