Royal Bank of Scotland came a step closer to full-scale nationalisation today as the bank unveiled a record £24.1 billion loss and plans to raise up to £25.5 billion from the taxpayer.
The firm - already 70 per cent state-owned - is raising the extra funds to strengthen its balance sheet and insure around £325 billion in toxic debts.
RBS will issue £13 billion in special 'B' shares to the Government, as well as a further £6.5 billion to take part in the Treasury's Asset Protection Scheme. It can also call on a further £6 billion if necessary.
RBS has already taken £20 billion in public funds and its annual losses of £24.1 billion for 2008 are the biggest in UK corporate history.
While the Government's shareholding in terms of votes will be capped at 75 per cent, its economic interest in RBS - its claim on RBS's assets - could rise to 95 per cent depending on its future performance.
Chief executive Stephen Hester said: "The economic stake could be anywhere from 75 per cent frankly all the way up to 95 per cent."
Mr Hester also gave a strong signal that tens of thousands of job losses are on the way at the beleaguered bank.
He said he "wouldn't dissent" from reports that as many as 20,000 jobs could be lost.
RBS shares were buoyed by details of the company's restructuring plan and the launch of the Government's toxic-asset insurance scheme. RBS shares were up 22 per cent or 5p to 28.1p, while Lloyds Banking Group rose 6p to 63.4p as it is also expected to participate in the scheme. Lloyds is due to report full-year figures tomorrow.
Derek Simpson, joint leader of Unite, said: "These historic and humiliating losses bring into sharp focus just how reckless RBS's former management team have behaved.
"The whole country is paying the price through job cuts and repossessions on a massive scale. It is time to take control and fully nationalise this bank."
RBS racked up bad debt charges of £7 billion and wrote off £16.2 billion, mostly on its disastrous acquisition of Dutch bank ABN Amro in 2007 and its US operations.
The bank - whose finances were weakened by the ABN deal - endured a disastrous year when the crisis sparked by Lehman Brothers' demise brought it to the brink of collapse.
In return for taking part in the Asset Protection Scheme - which Mr Hester described as "catastrophe insurance" for the bank - RBS has agreed to lend £25 billion over the next 12 months and a similar amount in 2010.
RBS will be liable for the first £19.5 billion in losses on the assets on the scheme and 10 per cent of any losses above that amount.
Chancellor Alistair Darling said: "We want to ensure that by cleaning up the balance sheet, that by making sure RBS has enough capital, we can get through this period."
Mr Hester said: "Participation in this scheme would assist us in reducing risk for shareholders whilst providing greater support for UK customers via increased lending."
RBS is selling or winding down a total of £540 billion in assets and businesses over the next three to five years - mostly related to its investment banking business. Its Global Banking and Markets operation made operating losses of almost £11 billion last year.
Mr Hester - who took over in November after former boss Sir Fred Goodwin resigned - said the "primary task" for RBS would be to rebuild its stand-alone strength so the Government could sell down its shareholding in the coming years.
He said the key "building blocks" for the bank were recapitalisation, management changes, identifying problems and forming a new strategy, taking part in the APS to "give us a measure of stability" and an improving economic climate.
"What we now have ahead is the task of execution," he added.
But he also warned over prospects this year, saying that making any forecast for 2009 would be "hazardous". He said: "Happiness for shareholders in terms of profitability is likely to be a long haul."Reuse content