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British bank busts

From Bloomberg on the Royal Bank of Scotland and Lloyds breakups…

~~~ “…It all smells to me a bit of politics and the start of election campaigning,” said Lothar Mentel, chief investment officer at Octopus Investments Ltd., which oversees $2 billion, including a stake in Lloyds. “The government wants to be seen as punishing the banks, whereas addressing the underlying problems of credit derivatives is a lot more complicated and less headline grabbing.”

Lloyds’s fundraising will boost its core Tier 1 capital to 8.6 percent from 6.3 percent. The bank will sell a retail banking unit with a 4.6 percent share of the U.K. current account market and 19 percent of the group’s mortgage balances to gain EU approval for its bailout last year.

The bank will also sell Cheltenham & Gloucester-branded accounts and mortgages, its Intelligent Finance online unit, some Lloyds TSB branches and the TSB brand within four years, the bank said.

Revised Terms

Under RBS’ revised terms of the asset protection plan, the bank will be responsible for the first 60 billion pounds of losses on the risky loans it puts into the program, compared with the 42.2 billion pounds initially agreed. It will be able to exit the program at any time in return for a 2.5 billion- pound payment, as long as the first loss hasn’t been exceeded.

In addition, the bank agreed to sell its RBS branches in England and Wales, NatWest branches in Scotland, its insurance division and the Global Merchant Services unit, according to the statement. RBS will also shed its stake in its Sempra commodities trading division.

The units generated 5.75 billion pounds of revenue last year, RBS said today. That’s about 21 percent of 2008’s total, according to RBS’s preliminary results reported in February.

RBS’s Hester is unwinding acquisitions made by his predecessor Fred Goodwinwho helped lead the bank during $140 billion of takeovers, swelling the balance to 2.2 trillion pounds, exceeding Britain’s annual economic output.”~~~

The “Break up banks” song will be increasing soon… and the derivatives symphony might get louder too…