Friday, April 18, 2008
RBS plans 12billion rights issue
Royal Bank of Scotland is planning a rights issue of up to £12bn to shore up its weakened balance sheet. The move comes after months of speculation that the UK's second biggest bank would have to appeal to shareholders for money. RBS has consistently indicated that it would not have to do a rights issue. RBS has decided to tap shareholders for capital due to worsening sub-prime writedowns and its already fragile tier one position, which makes it the most leveraged of Europe's banks. Goldman Sachs and Merrill Lynch are arranging the rights issue. Analysts estimate that RBS needs to raise £5bn-£12bn to repair its balance sheet and also expect a dividend cut. The move is believed to have been prompted by further sub-prime provisions on top of the £2.4bn already reported.