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RBS shareholders should take the money and run after lower than expected losses

27 February 2009 / by Rachael Stiles
Following the announcement from RBS yesterday that it has taken a loss of £24billion, not the £28billion which was predicted, investment advisor Nick Raynor is urging RBS investors to sell their shares.

While RBS' losses for 2008 were the worst in banking history, they were expected to have been even higher, causing its shares to rise yesterday.

Nick Raynor, investment adviser at retail share dealing firm, The Share Centre, believes that RBS shareholders should take advantage of the announcement that RBS has not come off as badly as expected and move quickly to sell their shares.

While the results are not as bad forecasted, they are "still a tremendous loss. Some may say the warning was a tactical decision by RBS to ensure the results were better received by the market." he said.

"We are advising existing investors to take advantage" of the 30 per cent rise in shares yesterday and sell now he encouraged, "as waiting to see what happens could prove costly."

Despite the huge losses announced by the bank, RBS was the second most popular investment for Share Centre share dealing customers over the last two weeks, and even as other banks' shares tumble there are more investors buying into banks at a greater rate than those selling out.

Mr Raynor warns that as nationalisation looms over RBS, those that venture into this investment should be "experienced investors with an appetite for risk." adding that "Less experienced traders should definitely watch from the side lines and sit this one out."

The City minister, Lord Myners, has insisted that a total nationalisation of RBS is something that the Government would rather avoid, but more money continues to flow into the bank to prevent it from collapsing.

Already 68 per cent owned by the state, it has emerged that the taxpayer could be taking on a potential 95 per cent stake in RBS, The Guardian has reported, as the Government injects more cash into the bank, providing further funds of up to £25.5billion, and setting up an insurance scheme for its toxic assets.

In a move that RBS chief Stephen Hester has said is "catastrophe insurance", the Government has insured RBS against future losses of £325billion of loans and investments, in what Robert Peston, the BBC's business editor, has described as "the mother of all banking bailouts."

The total injection of capital by shareholders is set to reach £39billion, he said, putting a "colossal amount" of taxpayers' money at risk.

"As for the potential hit that could be taken by taxpayers on the massive insurance policy we've written, that's anyone's guess." he said.

Liberal Democrat Shadow Chancellor, Vince Cable, said that the proposal to insure RBS' debts is a "disgrace and a total betrayal of the British taxpayer.

"Ministers have completely lost the plot." he said. "The Government is underwriting the banks' worst assets, nationalising the losses and privatising the profits. This elaborate scheme is concealing a very large and long-term taxpayer subsidy."

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