Two key tables from Cazenove on Tuesday in the wake of reports that the UK government will invest directly in Britain’s banks.
The first looks at dilution and the resultant state shareholding at various Tier 1 capital ratios.
The second takes a stab at the likely dilution after a compensatory warrant issue:
There are quite a few assumptions going on here. But Simon Pilkington of Caz believes that if the government is to provide the sort of funds needed to genuinely repair balance sheets, “the scale of investment will lead to material dilution while the on-going uncertainty is corrosive to share prices.”
He assumes the following basic principles:
- Action is large enough to restore confidence to debt investors and bring a halt to the rolling programme of emergency measures. We assume c. £26bn