British government to become major stakeholder in RBS bank - Summary
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Fri, 28 Nov 2008 10:26
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London - The British government is to become a majority stakeholder in the Royal Bank of Scotland (RBS) after shareholders failed to respond effectively to a cash-raising call. RBS, which is Britain's second-largest bank, based in Edinburgh, has been hard-hit by the credit crunch, reporting write-downs of nearly 6 million pounds (9 million dollars) and losses of 692 million pounds for the first half of this year. "We regret that existing shareholders did not take up their pre-emptive rights but understand that market sentiment towards the banking sector made this uneconomic in the short term," RBS chief Stephen Hester said Friday. Hester took over as chief executive in October, replacing Fred Goodwin, who was asked to go by the government as part of its major bail-out package for ailing banks agreed in early October. RBS announced that only 0.24 per cent of the new shares offered - or 56 million shares - were bought under the rights issue scheme. However, the small take-up had been expected as the offer price of 65.5 pence was about 10 pence higher than the price at which the shares were trading. This means that the government - and the taxpayer - will provide about 15 billion pounds for a majority stake of 57.9 per cent in RBS, as well as buying 5 billion pounds worth of preference shares. RBS, which also owns the NatWest bank, is among banks which have taken up a massive recapitalization offer made by the government in October. The bank's problems have also been linked to its ambitious 61-billion pound takeover of Dutch giant ABN Amro a year ago, and recent difficulties connected with the virtual collapse of inter-bank lending. The British government took temporary control earlier this year of mortgage lenders Northern Rock and Bradford & Bingley. It will also have a 40-per cent stake in a new banking giant due to result from the merger of Halifax Bank of Scotland (HBOS) with Lloyds TSB.
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