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RBS appeals to shareholders as credit crunch bites

18 April 2008 / by Joy Tibbs
According to reports, Royal Bank of Scotland (RBS) could be the next casualty of the credit crisis. It appears likely that the bank, led by Sir Fred Goodwin, will ask shareholders for between £5 billion and £12 billion to improve its financial position.

The second largest UK bank and owner of Natwest, RBS is expected to call upon its shareholders in the near future to bolster its balance sheet. It is thought that Sir Fred may come under intense pressure should a cash call be upheld.

The bank's annual meeting is scheduled to take place next Wednesday, and it is thought that its plans to raise capital may be unveiled on the same day. However, there are several other ways of shoring up its balance sheet and there has been no confirmation from RBS as yet to its next course of action.

RBS has been under a certain amount of strain since it led a takeover bid of Dutch Bank Amro in 2007, the total price for which was €71 billion. It is thought that selling shares to existing shareholders could help ease the pressure on the bank.

As rumours continue to circulate, some consumers may be concerned that the situation could worsen and that the bank could be in serious strife. However, reports have been careful to persuade consumers that this is a shareholder issue not a consumer issue and that account holders with RBS and Natwest should not panic.

RBS shares fell 2.4 per cent in late trading yesterday, but rose 3.9 per cent this morning. Other bank shares also suffered yesterday as caution gripped traders, but Barclays, Alliance and Leicester and HBOS were among the recovering FTSE companies this morning.

© Fair Investment Company Ltd