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RBS 'prepares fundraising plan' RBS 'prepares fundraising plan'
(30 minutes later)
Britain's second largest bank, Royal Bank of Scotland, is expected to ask shareholders for up to £12bn of extra cash to improve its financial position.Britain's second largest bank, Royal Bank of Scotland, is expected to ask shareholders for up to £12bn of extra cash to improve its financial position.
Several newspapers are reporting that RBS will raise the funds by selling shares to existing investors.Several newspapers are reporting that RBS will raise the funds by selling shares to existing investors.
The global credit crunch has meant banks worldwide are keen to shore up their capital positions - and it is thought others may follow RBS's move.The global credit crunch has meant banks worldwide are keen to shore up their capital positions - and it is thought others may follow RBS's move.
RBS, owner of NatWest, Ulster Bank and insurer Direct Line, has not commented.RBS, owner of NatWest, Ulster Bank and insurer Direct Line, has not commented.
In a statement, it would only confirm that it would give a trading update next week as planned. In a statement, it would only confirm that it would give a trading update next week as planned. The update is due ahead of its annual meeting on Wednesday.
They now have the smallest cushion relative to risk on their balance sheet of any bank in Europe Alex Potter, Collins Stewart Check RBS share priceThey now have the smallest cushion relative to risk on their balance sheet of any bank in Europe Alex Potter, Collins Stewart Check RBS share price
The update is due ahead of its annual meeting on Wednesday. Analysts stressed that this was not something that should worry people with accounts at any RBS banks.
"This is not a customer issue, it's a shareholder issue," said Justin Urquhart Stewart from Seven Investment Management.
Takeover moveTakeover move
RBS shares fell 2.4% in late trading on Thursday as rumours of a rights issue began to circulate.RBS shares fell 2.4% in late trading on Thursday as rumours of a rights issue began to circulate.
Cash reserves at RBS were stretched by its leading role in last year's takeover of the Dutch bank ABN Amro.Cash reserves at RBS were stretched by its leading role in last year's takeover of the Dutch bank ABN Amro.
"Banks have to retain a certain cushion of cash relative to the amount of risk on their balance sheet," said Alex Potter, banking analyst at Collins Stewart."Banks have to retain a certain cushion of cash relative to the amount of risk on their balance sheet," said Alex Potter, banking analyst at Collins Stewart.
"Having spent the best part of 70bn euros ($111bn; £56bn) last year on the biggest bank in Holland, they now have the smallest cushion relative to risk on their balance sheet of any bank in Europe.""Having spent the best part of 70bn euros ($111bn; £56bn) last year on the biggest bank in Holland, they now have the smallest cushion relative to risk on their balance sheet of any bank in Europe."
But RBS is unlikely to be the only bank considering going to the market for extra capital.But RBS is unlikely to be the only bank considering going to the market for extra capital.
Bradford and Bingley denied widespread reports at the weekend that it was planning to raise money in the same way.Bradford and Bingley denied widespread reports at the weekend that it was planning to raise money in the same way.
Heads of many of Britain's biggest banks, including RBS, had a meeting at Downing Street on Tuesday to discuss the continuing effects of the credit crisis.Heads of many of Britain's biggest banks, including RBS, had a meeting at Downing Street on Tuesday to discuss the continuing effects of the credit crisis.
The Bank of England is considering a plan to start accepting UK mortgage-backed securities in return for government bonds in an attempt to get banks lending to each other again, which in turn should ease up lending to individual borrowers.The Bank of England is considering a plan to start accepting UK mortgage-backed securities in return for government bonds in an attempt to get banks lending to each other again, which in turn should ease up lending to individual borrowers.
Analysts say that while a rights issue is most likely to be seen as a prudent, rather than desperate, move by RBS, it will also represent a U-turn for the bank's chief executive, Sir Fred Goodwin, who had previously insisted the bank did not need to tap shareholders for more cash.Analysts say that while a rights issue is most likely to be seen as a prudent, rather than desperate, move by RBS, it will also represent a U-turn for the bank's chief executive, Sir Fred Goodwin, who had previously insisted the bank did not need to tap shareholders for more cash.