Masochistic investment bankers should take note. The UK government has invited investment banks to pitch for the right to help sell down its stakes in Royal Bank of Scotland and Lloyds Banking Group. Any gain could be balanced by a fair dollop of pain.
UKFI, the body that manages the government's stakes, is seeking four different roles. The banks that bag the most senior of these - as bookrunners and co-lead managers - have the most to gain. They will get bragging rights by soaring up the equity capital markets league tables.
They will also reap the lion's share of fees. The government's 39 per cent stake in Lloyds is worth about £18 billion, while its 81 per cent holding in RBS is worth £25 billion. Assuming equity capital market fees of 2.5 per cent, over £1 billion could be up for grabs.
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To offset this, banks may choose safety in numbers. Roles as capital-markets and strategic advisers are also on offer, raising the prospect of a lengthy roster of banks. Yet this may mean fewer spoils to go round. Banks may even settle for lower fees to avoid public opprobrium.
Mandated banks could also face sniping from rivals about favouritism. Bankers who have previously worked at UKFI include John Crompton and Tim Sykes at HSBC. Current Chief Executive Jim O'Neil is set to rejoin Bank of America Merrill Lynch at the end of this year. That said, the tender documents have a section requiring banks to list potential conflicts of interest. And the scale of staff turnover means UKFI has links to several investment banks.
In short, UKFI's call to arms is hardly the most appealing privatisation mandate in history. However well the first sale of Lloyds shares goes, any prestige could be short-lived. The victorious bankers may well wind up with a painful Pyrrhic victory.
