RBS set for shareholder snub

25 November 2008 01:12pm

Taxpayers were sitting on paper losses of around £2.5 billion as the deadline for Royal Bank of Scotland's £15 billion share offer expired.

The Government has agreed to buy any of the 22.9 billion new shares not taken up by existing shareholders to shore up RBS's finances.

With the bank's shares trading at 55p - more than 10p below the 65.5p price of the new shares - investors are likely to snub the stock, leaving the public sector controlling up to 58% of the Edinburgh-based bank.

RBS will announce the results of the share offer by Friday. It comes just months after an original £12 billion rights issue by the bank before the financial crisis deepened in September.

Chairman Sir Tom McKillop apologised to shareholders last week at the meeting to approve the bail-out, saying he was "profoundly sorry" for the human and financial cost borne by investors.

The Government has also committed to buying £5 billion in preference shares - which impose restrictions such as a ban on dividend payouts - which RBS will buy back in time.

Two other banks, Lloyds TSB and Halifax Bank of Scotland, will also ask shareholders to buy £13 billion of new shares in offers underwritten by the taxpayer.

Shares in firms are also trading at below the level offered under the duo's fundraising schemes, leaving the public sector with a combined paper loss of around £1 billion.

Lloyds shareholders - who voted overwhelmingly to approve the HBOS takeover last week - will have until January 9 to take up their new shares if they choose. Lloyds is raising £4.5 billion through the offer and £1 billion in preference shares.

HBOS shareholders will not vote on the takeover and capital raising until December 12. The bank is looking to raise £8.5 billion in ordinary shares and £3 billion in preference shares, but its chairman Dennis Stevenson has warned the bank could face nationalisation if the rescue is rejected.

© The Press Association