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RBS posts record UK loss
Jan 19,2009 00:00
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Royal Bank of Scotland said Monday it lost more than £20 billion ($30 billion) last year, the biggest loss in British corporate history, including a huge goodwill hit on its purchase of parts of ABN AMRO in 2007. RBS said credit and market conditions deteriorated further in the fourth quarter and it will report a loss before goodwill impairments of between £7 billion and £8 billion for 2008. It expects a goodwill impairment charge of between £15 billion and £20 billion, largely related to its purchase of parts of ABN. It was still assessing the goodwill impairment, it said. RBS warned about its 2008 earnings alongside news of a second U.K. bank rescue plan. The plan aims to prompt banks to lend more to corporations and consumers to kick-start a deteriorating economy. (See full story) The U.K. government will replace the £5 billion of RBS preference shares it holds with ordinary shares, increasing its stake in the lender to up to 70% from 58%. Shareholders will be able to apply for new shares at a fixed price of 31.75 pence, representing an 8.5% discount to Friday's closing share price. The capital raising will improve RBS core tier 1 ratio by just under 1 percentage point to between 6.9% and 7.4%, the bank said. The redemption of the preference shares will remove an annual interest charge of about £600 million and improve its cash flow and capital generation, which it said will allow it to increase lending in Britain by £6 billion. The bank is working intensively on a new strategy involving "significant business, balance sheet, management and cultural restructuring" and will unveil significant elements of the plan at its full-year results due Feb. 26, it said http://money.cnn.com/2009/01/19/news/international/rbs.reut/index |