RBS announces £12 billion rights issue

Source: Exec Digital UK

Date :23/04/2008 09:20:32

The Royal Bank of Scotland unveils Britain’s biggest rights issue as well as a further £5.9 billion of credit crunch investment write-downs.

Britain's second biggest bank said on Tuesday it would also sell assets to generate £4 billion in core capital this year, mostly from the possible disposal of all or a stake in its insurance arm, which includes brands Direct Line and Churchill.

The planned disposals will allow RBS to rebuild its capital reserves, which have been stretched by its part in last year's takeover of Dutch bank ABN AMRO and the recent turmoil in financial markets.

Disposals would raise £4 billion of fresh capital, RBS said.

RBS shares

RBS will offer eleven new shares for every 18 existing shares at 200 pence per share in the underwritten rights issue, representing a 46 percent discount to Monday's closing price.

The bank said the U-turn on capital-raising was due to a sudden deterioration in credit markets in March and its view that the difficulties of the credit crunch would be prolonged.

Chief exit

RBS’ chief executive Sir Fred Goodwin is expected to come under fire at the group’s annual general meeting in Edinburgh today, with investors pushing for his exit.

One leading shareholder told The Times that Sir Fred was probably not the best person to lead the bank in the future. “Banks are not supposed to run out of money – this one did and it had to be rescued.”

However, Sir Tom McKillop, the bank’s chairman said yesterday that there was no need to look for a “sacrificial lamb”. “There is no single individual responsible for all these events. To look for a sacrificial lamb just misses the whole plot.”

April 23, 2008