RBS considering new cash call
Sep 21 2009 By Karen Dent, The Journal
PART-nationalised Royal Bank of Scotland is understood to be weighing up a new fundraising to prevent the taxpayer's stake in the ailing bank from rising further.
Chief executive Stephen Hester is reported to have started informal talks with investors over a possible cash call. Mr Hester is said to be considering the move to pay the £19.5bn fees due to the Government to take part in a taxpayer-backed insurance scheme for more than £300bn in toxic assets.
Under a draft agreement published in February, the bank is due to pay this fee with new shares to the Government – taking the taxpayer’s stake from 70% to 84%.
But with the recent recovery in stock markets, Mr Hester is reportedly testing the appetite for a fundraising move which would raise the cash from outside investors and keep the Government’s stake pegged at 70%. The FTSE 100 Index is now around 50% above the lows that it experienced in March, with RBS now up at 55p after plunging as low as 10p at the start of the year.
This currently gives the taxpayer a paper profit of £1.9bn on its stake in the bank, which declined to comment on the report.
The news comes after Lloyds Banking Group – in which the Government owns 43% – confirmed it was also looking at alternatives to taking part in the Asset Protection Scheme (APS).
Lloyds, which has been hit by the toxic loan book inherited from its rescue of HBOS, originally planned to put £260bn of debt into the scheme.
It said on Friday that it was looking at changes to the commercial terms, including the possibility of reducing the amount of assets covered by the scheme, or pulling out of it altogether and looking to raise funds from the market instead.
The complex negotiations over both banks’ participation in the APS are subject to state aid approval from the European Union and are unlikely to be completed quickly.
Under the terms of that approval, European officials could demand that both banks sell off parts of their businesses in return for taxpayer support.
