Rights issue proves a success for RBS and sets the trend for HBOS and B&B

09 June 2008 / by Rebecca Sargent
Royal Bank of Scotland (RBS) has today announced the success of its £12billion rights issue that was called for in April this year.

The results show that 95.11 per cent of the shares worth £12billion have been taken up. The statement reveals that 5,823,635,440 of the cut price shares received valid offers, leaving just 299,375,022 shares for the underwriters to find valid buyers for.

The RBS rights issue is record breaking due to the sheer amount being asked of its shareholders. However, the bank is not alone in its actions, the current credit crisis caused by US sub-prime lending has hit UK banks hard and forced several to make cash calls to shareholders in order to bulk out their balance sheets.

Chief executive officer of stockbroker TD Waterhouse, Angus Rigby, said: "RBS has led the field with its record £12billion rights issue and, understandably, has been the focus of our customers trading activity for the last few weeks. Initial figures show that around 67 per cent of TD Waterhouse retail investors have chosen to take up their rights to buy extra shares."

HBOS is next, due to enact its £4billion rights issue by the end of July and, although the success of RBS' share sale paves the way, it has led analysts to speculate over the expected success of HBOS' call to shareholders.

According to experts, the speculation is down to the fact that HBOS has two million private shareholders, the biggest non-institutional shareholder base in the UK. Consequently, experts argue that HBOS may find itself struggling to get sufficient take-up of its rights issue as private investors face strains on their disposable income as a result of the tightening economic climate.

There had been fears in the economic world that either rights issue would be a flop as a direct result of Bradford & Bingley's renegotiated cash call. According to experts, the reduction of shares offered to shareholders not only damaged the bank's reputation but also dented confidence in rights issues as the reduced amount and cost indicated a low take-up.

Mr Rigby added: "Our retail investors were split over the prospect of a cheap price and longer term performance of Britain's biggest buy-to-let mortgage lender. B&B's initial rights issue proposal at 82p has already been abandoned and replaced this week at a reduced price of 55p."

In attempts to boost its shareholders' confidence, Bradford & Bingley bosses have reportedly invested in £0.5million shares. However, despite this move, Mr Rigby concluded that: "It remains to be seen how successful both HBOS and B&B will be at wringing money from their shareholders."

© Fair Investment Company Ltd