Month: August 2014
A bit of fun for a slow August. We promise at least 20% Return on Equity (ROE) if you help fund this particular startup bank idea; most established banks are giving 4% to 8% ROE. Internal Rate of Return (IRR) of around 100%. Get in touch if you are interested in learning more about and investing in this or one of our other, perhaps less zany, bank concepts!
- We employ some currently unemployed bankers (adding value to the economy).
- We raise £1 billion of equity (fuelling capital flows, perhaps even internationally).
- We use the £1 billion to purchase as much high-grade securities as we can (minus set up costs), paying circa 4-5% coupon (Supporting the Govt/Treasury).
- We use the securities as collateral to borrow £9 billion from the BofE at overnight rate of 0.5% (Providing revenue to the Treasury).
- We buy another £9 billion of securities at similar rates as the first batch. At this rate, we are earning at least £400 million per annum from the interest payments alone.
- We continuously roll the overnight position with the BofE, pledging more of the security pool in collateral if required on margin calls.
- We go public. After costs, the bank is earning at least £200 million a year with a high capital ratio (10% equity-to-debt), and the balance sheet will be clean (all low risk securities). Potential valuation of 20-times earnings: £4 billion. We sell 25% of the company for £1 billion. (Give the man on the street an opportunity to share in our success and realise a return for investors)
- Put the £1 billion raised to good use – go back to Step 3
- When market cap hits £10 billion, sell another 10% of the company for £1 billion. Go back to Step 3 again.
- Expand to US. Fed is lending at 0.25%. Repeat formula.
- Start focusing on PR and social issues, buy branch networks from defunct banks and start making actual loans to retail and corporate consumers (Social, Economic and Cultural good).
- Exit for a ridiculous valuation. Everyone wins! 🙂