Royal Bank of Scotland shares fell to a 15-year low yesterday as speculation mounted that the embattled bank would seek to raise £10bn of capital from shareholders under the Government's bailout plan.
RBS's already battered shares lost a quarter of their value, taking a sudden plunge in late trading to 71.7p. The fall more than wiped out all the gains the shares had made after the Government announced its bailout plan for the banking system on Wednesday.
The shares fell partly on the prospect of the bank tapping shareholders in a second massive capital raising. RBS has already raised £12bn from shareholders this year in a record rights issue to boost its buffer against losses.
The bank's shares have fallen 81 per cent this year as concern grew about its ability to fund its loans. Fears about an imminent collapse in market confidence in the bank were a major factor in the Government rushing out its £400bn rescue plan for the sector this week.
The bank is valued at just £11.9bn – less than the value of the capital it raised in June's rights issue.
Credit Suisse analysts calculated that RBS might have to raise £10bn of share capital under the Government's plan with Barclays and HBOS each needing £5bn and Lloyds TSB requiring £4bn. HBOS fell 19 per cent to 124.2p and Lloyds TSB dropped 11 per cent to 189.4p. Barclays fell 15 per cent to 207.5p.
"The Government will likely provide some of this funding but we believe there's a good chance existing shareholders get involved with government supporting such issues. The alternative is seeing their [shareholders'] bank 20-40 per cent nationalised," the analysts wrote.Reuse content