British government buys 58 percent RBS stake
Britain bought a 58 percent stake in Royal Bank of Scotland on Friday as the state picked up 15 billion pounds ($23 billion) of shares in the lender after investors shunned a rescue plan.
It marks the latest attempt by European countries and the United States to shore up ailing banks to halt the fallout from a global credit crisis, and adds to UK taxpayers' exposure to the sector after the nationalization of two smaller lenders earlier in the year.
RBS said its investors took just 0.2 percent of the shares on offer -- including purchases by board members -- to leave the government with the remaining 22.8 billion shares.
Take-up was expected to be minimal after RBS shares fell below the 65.5 pence per share offer price.
"The weekend papers will be full of it, but it didn't surprise anyone in the City... It was expected because the share price was trading below the rights price," Evolution Securities analyst Bruce Packard was quoted by Reuters as saying.
The deal forms the largest part of the government’s wider plan to recapitalize Britain’s banks.
Last month, RBS, Lloyds TSB Group PLC and HBOS PLC agreed to sell a combined 37 billion pounds worth of stock to shore up their balance sheets. In all three cases, the government guaranteed to buy any shares not purchased by investors.
Shares in RBS were roughly flat at 55 pence in early trading on the London Stock Exchange, as the market had been widely expecting that the government would be taking a majority stake in the bank.
Last week, shareholders approved the capital raising plan though it was clear that ordinary investors would be unlikely to buy the new shares because they were selling for 65.5 pence - around 28 percent more than the existing share price.
RBS shares were above 380 pence last December, and above 200 pence as recently as Sept. 26.
The bank is expected to buy the preference shares back from the government as soon as possible because it will be forbidden from paying any dividends to ordinary shareholders while the preference shares are outstanding.
The drastic fundraising plan comes on top of a 12 billion pounds rights issue by RBS earlier this year - at the time the biggest ever rights issue in Europe.
RBS has been one of the hardest hit European banks in the financial crisis because of its large exposure to sub-prime loans and its expensive purchase of ABN Amro bank just before the credit crunch.
Turkish Daily News
