This recently filed by our banks team:
Britain was on Sunday preparing to pump more than £37bn into four of the country’s largest banks in a broad-based recapitalisation that could that could see the UK government end up with controlling stakes in Royal Bank of Scotland and HBOS.
Top executives from RBS, HBOS, Lloyds TSB and Barclays were last night locked in talks with government officials in a frantic attempt to hammer out details of the capital increase before the markets reopen on Monday.
Under the plans being discussed, RBS is likely to raise as much as £20bn in fresh capital. Of this, £15bn would come in the form of a placing of ordinary shares with the government, with the remainder in the form of preferred shares.
Existing RBS shareholders will given an opportunity to buy the shares, but if they do not the government is expected to be left with a controlling stake in the bank.
RBS to raise £20bn – a mind boggling figure and £5bn more than than reported in the Sunday press. If shareholders don’t take up their rights this is going to be seriously dilutive.
As of Friday’s close the market capitalisation of RBS was a touch under £12bn.
Clearly Sir Fred is not going to survive this one:
Sir Fred Goodwin, RBS’s embattled chief executive, is expected to step down, to be replaced by Stephen Hester, the former banker who is currently chief executive of British Land. Sir Fred will become by far British banking’s biggest casualty of the credit crisis.
And one other consequence of this record breaking cash call – the terms of the HBOS/Lloyds deal may be revised:
HBOS is expected to raise around £12bn, of which £9bn would be in the form of ordinary shares while Lloyds TSB – with which it is due to merge – is expected to raise a total of around £5bn. The capital increase and the prospect of a large government shareholding may also prompt Lloyds to rethink the terms of its planned takeover of HBOS, announced last month.
Still no news, however, on whether trading in London will be suspended as the Sunday Times reported earlier today.
Related links
UK to inject over £37bn into banks – FT
The humbling of our banks – PestoWire