Royal Bank of Scotland (RBS) announced yesterday a record share issue of £12 billion (US$23.77 billion) to shore up its finances after huge asset writedowns and acquisition of ABN Amro bank.
The new shares would be made available to existing shareholders at 46.3 percent below the closing price of RBS stock on Friday of 372.5 pence per share, the bank said.
The bank said that it would have to make further asset writedowns of £4.3 billion, or £5.9 billion before tax, arising from the credit crisis and resulting turbulence on financial markets.
It would also sell some assets and warned the dividends would be diluted in the short term.
“The proposed rights issue will raise proceeds of £12.0 billion net of expenses,” the bank said in a statement.
RBS chairman Tom McKillop said: “This is a difficult time for the financial services industry and it has presented us with specific challenges. Central to these has been the question of our capital ratios, which have been the focus of much attention, both internal and external, over recent months.”
“The overall underlying performance of the group has remained satisfactory with the principal exception of a slowdown in capital markets activity in global banking and markets,” the bank said.
To achieve its targets for shareholder funds in relation to key categories of risk, the board had decided “with regret” that this had to be done via a share rights issue, the bank said in a statement.
RBS, the second-biggest British bank, said that the issue of new shares, the biggest-ever in the UK, had been entirely guaranteed by three banks, Goldman Sachs, Merrill Lynch and UBS.
The issue would be made on the basis of 11 new shares for 18 shares held at a price of 200 pence per share.
“Following the rights issue, RBS believes that it will be in a strong position to realize the substantial value in its United Kingdom and international franchises and to take advantage of the growth opportunities available to it,” the bank said.
The bank, which is based in Scotland, also said it would sell some non-strategic assets including all of part of its insurance activities to raise a further amount of 4 billion euros after tax by the end of the year.
The measures were intended to raise the ratio of “core tier-one” shareholders’ funds to more than 6 percent from 4 percent.
The bank said “the 2007 dividend payout ratio of around 45 percent remains sustainable over the medium-term, given the strength and diversity of the group. The board will assess future dividends based on circumstances at the time.”
“It should be noted that the capital raised in the rights issue is not expected to generate the same return as existing capital in the business,” it said.
“This effect alone is likely to result in a reduction in dividend per share in 2008, after taking into account an adjustment in respect of the bonus element of the rights issue,” the bank said.
SECURITY: As China is ‘reshaping’ Hong Kong’s population, Taiwan must raise the eligibility threshold for applications from Hong Kongers, Chiu Chui-cheng said When Hong Kong and Macau citizens apply for residency in Taiwan, it would be under a new category that includes a “national security observation period,” Mainland Affairs Council (MAC) Minister Chiu Chui-cheng (邱垂正) said yesterday. President William Lai (賴清德) on March 13 announced 17 strategies to counter China’s aggression toward Taiwan, including incorporating national security considerations into the review process for residency applications from Hong Kong and Macau citizens. The situation in Hong Kong is constantly changing, Chiu said to media yesterday on the sidelines of the Taipei Technology Run hosted by the Taipei Neihu Technology Park Development Association. With
CARROT AND STICK: While unrelenting in its military threats, China attracted nearly 40,000 Taiwanese to over 400 business events last year Nearly 40,000 Taiwanese last year joined industry events in China, such as conferences and trade fairs, supported by the Chinese government, a study showed yesterday, as Beijing ramps up a charm offensive toward Taipei alongside military pressure. China has long taken a carrot-and-stick approach to Taiwan, threatening it with the prospect of military action while reaching out to those it believes are amenable to Beijing’s point of view. Taiwanese security officials are wary of what they see as Beijing’s influence campaigns to sway public opinion after Taipei and Beijing gradually resumed travel links halted by the COVID-19 pandemic, but the scale of
A US Marine Corps regiment equipped with Naval Strike Missiles (NSM) is set to participate in the upcoming Balikatan 25 exercise in the Luzon Strait, marking the system’s first-ever deployment in the Philippines. US and Philippine officials have separately confirmed that the Navy Marine Expeditionary Ship Interdiction System (NMESIS) — the mobile launch platform for the Naval Strike Missile — would take part in the joint exercise. The missiles are being deployed to “a strategic first island chain chokepoint” in the waters between Taiwan proper and the Philippines, US-based Naval News reported. “The Luzon Strait and Bashi Channel represent a critical access
Pope Francis is be laid to rest on Saturday after lying in state for three days in St Peter’s Basilica, where the faithful are expected to flock to pay their respects to history’s first Latin American pontiff. The cardinals met yesterday in the Vatican’s synod hall to chart the next steps before a conclave begins to choose Francis’ successor, as condolences poured in from around the world. According to current norms, the conclave must begin between May 5 and 10. The cardinals set the funeral for Saturday at 10am in St Peter’s Square, to be celebrated by the dean of the College
RSS