RBS raises £ 12 billion and apologises PDF Print E-mail
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Royal Bank of Scotland (RBS) shareholders have approved the bank's request for an extra £12bn in capital.

RBS hopes the money raised by selling stock to its existing shareholders will help cover losses related to the global credit crunch. RBS said that shareholders approved the rights issue - the biggest in British corporate history - by a 95% majority. At the General Meeting, shareholders showed their disapproval of the management and finally received an apology from the Chairman.

The first shareholder to speak at the meeting stated that shareholders had no option but to approve the rights issue. He requested an assurity that the bank would not pay high bonuses to employees when the banks shareholders had lost more than half their money.  The shareholder emphasised that when employeees fail to add value they should not be paid a bonus on top of their salary. Another shareholder asked why there had been no resignations, no apology and no dismissals? Another shareholder, stating that shareholders and the market had expectations of changes at the top, asked if such changes were underway?

The Chairman emphasised a number of times that lessons had been learnt, that certain activities had been discontinued, improved controls had been established in the Corporate Banking and Markets division and that a number of employees in the United States had left the bank. He stated that the bank was asking for a significant commitment from its shareholders and gave an apology to shareholders.

The Financial Times reported the "Royal Bank of Scotland has been sounding out shareholders about the level of support for its top executives as the banking group seeks to rebuild confidence with investors following its £12bn rights issue. Bob Scott, senior independent non-executive director, has met a number of investors in recent weeks to take soundings about their views on the bank's corporate governance."

From the looks of the very subdued Sir Tom McKillop, Sir Fred Goodwin and Johnny Cameron, one could imagine that investors have been pointed in their criticisms. 

 

 

Background:

RBS has announced record £ 12 billion rights issue to cover increased write-downs on the value of sub-prime and leveraged loan assets and strengthen its stretched capital ratios. It also announced that it would dispose of assets to generate £4 billion in core capital in 2008.

This is a serious strategic turn around for the Group, which had previously focused on balance sheet efficiency. Less than eight weeks ago, the RBS Group Chief Executive, Sir Fred Goodwin, stated that the Group had “no plan for any inorganic capital raising”.

The rights issue and 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 turmoil in financial markets in recent months. The most likely disposals will be all of or a stake in its insurance arm which is seen as non-strategic.

RBS will offer 11 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.

According to Reuters, “the size of the extra shares alone would represent Britain's 30th-biggest company”.

RBS said it expects additional hits to the value of assets, including the ABN AMRO wholesale business it bought last year, due to the impact of the U.S. sub-prime mortgage crisis and subsequent credit crunch. It estimated the effect of write-downs on core capital will be £5.9 billion (£4.3 billion after tax).

Comments (13)add comment

a guest said:

I agree. Hopefully they have learnt their lesson on the importance of capital strength. Getting ABN to work is crucial as is the markets and corporate bank division. Imagine if Diamond was running it.
 
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June 13, 2008
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a guest said:

the bank is in a very healthy position, compared to all its competitors , it is a great investment opportunity, limited downside , but when the sector recovers this stock will explode
 
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June 12, 2008
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a guest said:

direct line and churchill gone to fund ABN, what was the strategic value of ABN?, what does it do for RBS?
Answers on a postcard please.(unless your answer is to thwart Barclays)
Why do you not ask this question to the RBS board?, i have tried via email, and failed to get an answer...................
 
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May 19, 2008
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a guest said:

The problem must be with Cameron. The main returns from the ABN deal should come from the Corporate Bank/Markets business. Doesn't give you much faith when you realise that his team must have done the due diligence on ABN's market business which has since cost RBS £2 bn. And his business is still in the red. And he has to make it all work going forward - already people leaving him - they need someone better to run this!!
 
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May 16, 2008
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a guest said:

how uncomfortable, i am about to resign uncomfortable?
 
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May 16, 2008
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a guest said:

I went to the General Meeting in Edinburgh. It was quite clear that Goodwin and Cameron are under pressure. They made no comment during the whole meeting and looked very uncomfortable as they walked out at the end.
 
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May 16, 2008
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a guest said:

goodbye dividend, hello chapter 9
 
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May 15, 2008
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a guest said:

fantastic check out the SP, im glad i never exercised my options i may then have to worry about all that extra cash i would have, thanks Nat West
 
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May 15, 2008
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a guest said:

i have had enough, i have owned this bank(nat west) for many years, it is not the great institution it once was, there are better financial s to own in your pension holding, what is the possibility of decent dividends going forward?
 
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May 09, 2008
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a guest said:

keep the institutions happy, try and preserve the value of equity options, cling on to your job, accept no responsibility, we are becoming American without the marketing expertise
 
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April 24, 2008
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a guest said:

They over priced ABN and according to the Chairman the Board wanted to renegotiate but that wasn't possible. Well who signed or drew up the offer without a let out clause re market conditions? Have they still got their job also?
 
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April 23, 2008
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a guest said:

Who did the DD on ABN, champagne corks are popping at barclays
 
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April 23, 2008
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a guest said:

Listening to the analyst and media presentations, it appears that it's nobody's fault - so jobs are kept and bonuses paid.
 
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April 23, 2008
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