RBS posts huge loss, unveils restructuring program
Royal Bank of Scotland posted a record net loss of $34.4 bn for 2008 - the biggest in British corporate history.
By Sudeshna Sen, ET Bureau |
Royal Bank of Scotland announced UK���s biggest ever loss by any company, of GBP ��24.1 bn, even as it also announced that the UK government had agreed to a historical bailout package that could see the government adding up to GBP 25.5 bn to the bank as fresh capital, at the same time the public will insure up to GBP 325 billion of RBS��� toxic assets in the government���s newly announced asset restructuring scheme.
Hectic parleys over the week led to the deal, in return for which RBS has agreed to lend up to GBP 25 billion in the local UK market, both in mortgages and loans. RBS also announced a global restructuring, albeit without details, saying it will reduce its presence in 34 out of the 56 countries it is present in, mostly on the retail side. The market greeted the bank���s news with cheer, sending stocks up as it showed the first signs that the UK governments attempts to force banks to start lending is having an effect.
Also, the fear that RBS, already 70% state owned, would have to be fully nationalized has receded with this deal, which will see the UK government taking GBP 13 billion new preference shares, and committed to a further GBP 6 bn in mostly non-voting shares.
The news came at a time when there���s rising controversy over the GBP 650,000 annual pension due to former RBS chief Fred Goodwin, with UK���s finance minister Alistair Darling asking him to give up the pension, even as the bank is believed to be examining contractual agreements.
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