Reports
RBS Signal Massive Loss, Agrees Capital Restructure
UK-listed Royal Bank of Scotland, which owns the private bank Coutts, said it expected to report a full-year loss, before goodwill impairments, of between £7 billion and £8 billion in 2008. The announcement sent its shares down by about 70 per cent.
In a trading statement, RBS, which has been partly nationalised by the UK government since last autumn, said it expects its group to report it has broken even in its underlying financial performance after credit impairments are taken into account.
Shares in the Edinburgh-based bank plunged as far as 10 pence at one stage, a fall of more than 70 per cent from the open, before recovering slightly.
RBS also announced it had reached a capital restructuring deal with the UK government to replace the £5 billion of preference shares it holds with new ordinary shares. Eligible RBS shareholders will be able to apply to subscribe for approximately £5 billion of new ordinary shares pro rata to their existing shareholdings at a fixed price of 31.75 pence per share. This represents an 8.5 per cent discount to the closing price on 16 January 2009.
These new ordinary shares will be offered to shareholders and new investors on the same basis as the offer last November. The ordinary shares offer is fully underwritten by the government. Proceeds of the issue will be used to fully redeem the preference shares held by the UK government.
The capital restructuring is expected to increase RBS's pro forma core tier one ratio by just under 1 per cent, to between an estimated 6.9 per cent and 7.4 per cent.
"The dislocation of credit markets and the global economic downturn continue to hit RBS hard, as with many other banks. We are making progress in recognising excess risk and dealing with it. Significant uncertainties and risks inevitably remain,” said Stephen Hester, RBS group chief executive.
A new strategic plan for the bank, involving significant business, balance sheet, management and cultural restructuring is being worked on intensively for presentation in the second quarter of 2009 but significant elements will be announced with the 2008 final results in February, RBS said.
