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| RBS sets out £12bn rights issue | RBS sets out £12bn rights issue |
| (30 minutes later) | |
| Royal Bank of Scotland (RBS), Europe's second biggest banking group, is asking shareholders for an extra £12bn to shore up its finances. | |
| The rights issue was announced as part of a trading update and is one of the largest seen in UK corporate history. | The rights issue was announced as part of a trading update and is one of the largest seen in UK corporate history. |
| The firm also announced a write-down of £5.9bn before tax, following its exposure to the credit markets. | The firm also announced a write-down of £5.9bn before tax, following its exposure to the credit markets. |
| RBS said it may sell assets to raise £4bn. It is reviewing its insurance arm including Churchill and Direct Line. | |
| Market conditions | Market conditions |
| RBS, which played a leading role in last year's takeover of the Dutch bank ABN Amro, said it needed to increase its cash base and a rights issue was the best option. | RBS, which played a leading role in last year's takeover of the Dutch bank ABN Amro, said it needed to increase its cash base and a rights issue was the best option. |
| In its latest update, which covered the period from 31 December to 22 April 2008, RBS said global banking and markets had been "acutely affected by credit market conditions" especially in March. | In its latest update, which covered the period from 31 December to 22 April 2008, RBS said global banking and markets had been "acutely affected by credit market conditions" especially in March. |
| WHAT IS A RIGHTS ISSUE? Companies issue extra shares to raise money They are offered to existing shareholders, usually at a discount to the current share priceShares are offered in proportion to existing holdings, so if you own 10% of the old shares you are offered 10% of the new ones See Robert Peston's blog | |
| The bank said it had seen a "severe and increasing deterioration in credit market conditions, the worsening economic outlook and the increased likelihood that credit markets would remain difficult for some time". | |
| Under the terms of the rights issue, 11 new shares will be issued for every existing 18 shares at 200 pence each. | |
| The rights issue value is 46% less than Monday's closing share price of 372.5p. | |
| "It's a reassuring discount, and investors will be pleased that it's such a large amount and not £5bn or £6bn - they want RBS to raise some money so that the company can move forward," said Mark Sartori, head of European trading at Fox-Pitt Kelton. | |
| BBC business editor Robert Peston said that the bank would "retain more capital in its balance sheet to meet the risks of default by borrowers than it had been doing". | BBC business editor Robert Peston said that the bank would "retain more capital in its balance sheet to meet the risks of default by borrowers than it had been doing". |
| He added that he thought other UK banks may well follow suit. | |
| Greater efficiency | |
| RBS said that, following its integration with ABN, it aimed to cut staff numbers by more than originally planned, and added it was seeking to cut costs by 2.3bn euros, up from an earlier estimate of 1.7bn euros. | RBS said that, following its integration with ABN, it aimed to cut staff numbers by more than originally planned, and added it was seeking to cut costs by 2.3bn euros, up from an earlier estimate of 1.7bn euros. |
| The news comes a day after the Bank of England said it would make £50bn available to banks, to help them tackle the credit crisis by allowing banks to exchange their mortgage-backed assets with government bonds. | |
| On Wednesday, RBS is set to have its annual general meeting. | |
| Are you a shareholder with Royal Bank of Scotland? What do you think about this move? Are you affected by the credit crunch? Send your comments using the post form below: | |