The numbers keep getting bigger and bigger, first of bank losses, then of capital raises to try to get things back on a semblance of an even keel.
Even so, the $24 billion (£12 billion) raise is nevertheless a stunner, hugely dilutive to existing shareholders. And note this comes in addition to a dividend cut and £4 billion in asset sales.
From Bloomberg:
Royal Bank of Scotland Group Plc, the U.K.’s second-biggest lender, will sell 12 billion pounds ($23.7 billion) of new shares to investors to boost capital depleted by writedowns.
The Edinburgh-based bank marked down 5.9 billion pounds of assets and said it will cut its 2008 dividend, according to a statement today. The board defended Chief Executive Officer Fred Goodwin, who has come under pressure from investors, saying it has “full confidence that the executive team will be able to lead RBS through the current challenging conditions.”
RBS, which bought ABN Amro Holding NV with partners Banco Santander SA and Fortis for about 72 billion euros ($114 billion) in mostly cash last year, has had its capital cushion eroded by the acquisition and credit markdowns. The company said the outlook still is “inevitably clouded” by market turmoil sparked by the U.S. subprime mortgage market meltdown.
“They have overpaid for acquisitions and have had a weak capital base but there’s nothing in this statement which confesses that they have made significant mistakes over recent years,” said Simon Maughan, an analyst at MF Global Securities Ltd. in London. “We would like to see disposals from the global banking and markets portfolio which got them into trouble.”
The company, which has cut jobs and sold assets, has lost more than a third of its market value since the start of the credit turmoil in August. It plans to issue 11 new shares for every 18 existing shares at 200 pence a share.
It will raise 4 billion pounds in asset disposals and plans to raise its Tier 1 capital ratio, a measure of capital strength, to more than 8 percent from 7.3 percent and its core equity Tier 1 ratio to more than 6 percent from 4.5 percent by the end of the year, it also said..
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They’re also marking their US alt-a at 50%, subprime at 38%, and cmbs at 83%.
Press release:
http://www.londonstockexchange.com/LSECWS/IFSPages/MarketNewsPopup.aspx?id=1818762&source=RNS
(Sorry, don’t know how to embed a link.)
Of course, ahem, we must conclude that RBS’s portfolio is far worse than any US bank’s…
Steve,
Wow. Thanks. And everyone here thinks the credit crisis is contained (although no one will use that discredited word) and now all we have to worry about is the trajectory of the recovery and how bad inflation gets to be.
Yves,
Yes this RBS summary is damn sobering and is likely the first example of the greater transparency that BOE/Treasury are demanding from UK banks in exchange for the new borrowing facility. RBS may have exaggerated the marks to give themselves wiggle room, since they really can’t go back to the cap markets for a while. But still, the difference from marks at US banks (particularly commercial banks) is sobering and a sign that the crisis is going to drag on `in full opacity’ in the US for quite some time.
What what are these type of assets being marked at in the US?
UBS is marking their ALT A at 96
subprime cdos at 58% in latest read.
I belive C Alt A is $58B – ouch.