RBS passes to majority state-ownership

by Gill Montia

Story link: RBS passes to majority state-ownership

Royal Bank of Scotland (RBS) is to become majority state-owned.

The bank’s latest recapitalisation involved the Government underwriting a £15 billion rights issue, at 65.5p a share, having already committed to buying £5 billion of RBS preference shares, paying annual interest at 12%.

The offer closed earlier this week and according to today’s statement from RBS, 0.24% of the new shares were taken up by existing investors, leaving the Government with around 23 billion shares, or a 57.9% stake in the group.

The bank’s chief executive, Stephen Hester, has acknowledged that market sentiment made it uneconomic for existing shareholders to take up their rights.

RBS shares peaked in value last year, when the group was valued at £60 billion and this summer the bank was able to raise a record £12 billion in a rights issue at 200 pence per share.

However, since the announcement of the fundraising in October, RBS stock has fallen below the issue price of 65.5p per share.

As a result, the Government’s bail out has initially left the taxpayer with a paper loss of close to £2.5 billon.