As financial disasters go, Royal Bank of Scotland (RBS) will take some beating. While the Lloyds (LLOY) ‘Deal of the Century’ was more ludicrous at the time, the attempt by RBS to become a leading world bank has had far more serious consequences – consequences that continue to haunt it.
Its sixth annual loss in a row comes to £8.2 billion, its second worst since the financial crisis. Even if you strip out the one-off bills for mis-selling and bad loans, RBS still lost money.
A loss of £8 billion is so large as to be virtually meaningless. What it does mean, in terms that one can understand, is that this is a really lousy investment even before you consider that the government will at some stage attempt to cut its losses by dumping shares onto the market.
We all have a stake in RBS through the government so there really is no need to add to your misery by holding shares personally as well. Why the shares trade above 300p each is as much a mystery as why people running up the losses should get pay rises and bonuses.
In contrast, IAG (IAG), owner of British Airways and Spanish airlines and another company castigated in this column in the past, has bounced back into profit. A note of caution is warranted: this year’s profit does not even pay off last year’s loss so there is still a long way to go. I am not keen on airlines because they tend to bounce up and down, IAG more than EasyJet (EZJ) and Ryanair (RYA).
However, it would be churlish not to acknowledge that IAG has taken a significant step forward. Let’s hope it lasts.
When will the FTSE Reach a Record High?
The way the FTSE 100 index surged to its highest closing level for more than 13 years led me to believe that a new record would be set by now. Not so. It proved to be another false dawn and the index has fallen back below 6,800 points, around which level it now hovers.
It is easy to panic when we get these setbacks but it is also good news for investors like me who have to find a new home for the Vodafone special dividend pay-out or have still to mop up their ISA entitlement.
The index is in fact moving sideways with a slightly upward trend. We could still reach 7,000 points in March.
Rodney Hobson is a long-term investor commenting on his own portfolio; his comments are for informational purposes only and should not be construed as investment advice.