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How long before the government disinvests bank share stakes?

Even though the UK government is looking to dispose of a number of share stakes in the likes of Lloyds bank, Royal Bank of Scotland, Northern Rock and Bradford & Bingley prior to the next general election, there are creeping suspicions that this may not be possible. The very fact that the potential sale of substantial share stakes has already leaked into the marketplace has in many ways put a cap on the short-term performance of the shares in question.

However, with the authorities keen to raise significant funds before the next election there is every chance we may see a number of convertible bonds sold into the debt market which would ultimately be convertible into ordinary shares in the likes of Lloyds TSB, Royal Bank of Scotland, Northern Rock and Bradford & Bingley. This would both allow investors to gain exposure to a sector which many believe has recovery potential while also allowing the government to bring in significant income in the short term. However there is one issue to consider!

The UK government will need to come out of the UK banking sector showing a profit on the various share purchases and bailouts. If the investments do not work out, and crystallise into a loss, this will attract massive criticism from all areas of the UK economy, UK business arena and UK voters.

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