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November 20, 2008

RBS apologises for financial difficulties

by Kay Murchie

Story link: RBS apologises for financial difficulties

Sir Tom McKillop, the departing chairman of the Royal Bank of Scotland (RBS), has apologised for the bank’s difficulties.

The apology came ahead of the shareholder vote for the £20 billion Government bailout, of which shareholders voted by 99% in favour.

Earlier this month, the bank said it expected to report its first full-year loss since it was established almost 300 years ago.

Sir Tom said he was sorry about the very real financial and therefore human cost that those who have invested in us now feel and recognise how seriously this has impacted shareholder confidence in RBS.

Sir Tom added that the current crisis was the ‘most difficult experience in over 40 years of his working life’.

Under the terms of the £20 billion capital raising, RBS plans to raise up to £15 billion, through which the Government is underwriting a share issue at 65p a share. However, it is likely that the taxpayer could be left holding almost 60% of the bank if shares remain below this level. Shares in RBS closed today at 46p.

According to Nick Cosgrove, a reporter for the BBC, RBS has had heavy exposure to the US sub-prime mortgage market and paid too much for Dutch bank, ABN Amro.

Meanwhile, earlier this month, the bank announced further write-downs on credit assets totalling £206 million, on top of the £5.9 billion it reported in the first six months of the year.

To add to its woes, RBS announced last week that it is to axe 3,000 staff from its global banking and markets division.

Sir Tom McKillop is to step down next April, while chief executive, Sir Fred Goodwin, has been replaced by Stephen Hester, former chief executive of British Land.

In related news, yesterday Lloyds TSB shareholders voted on the proposed takeover of Halifax Bank of Scotland (HBOS) with 95.98% voting in favour of the deal.

 

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