The Royal Bank of Scotland is set to record losses of up to £28bn for 2008 as the Government announces plans to take its stake in the ailing institution to about 70%.
RBS shares plunged more than 15% this morning as it revealed losses for the full year are likely to be between £7bn and £8bn, with an additional £15bn to £20bn write-down relating to its ABN AMRO acquisition.
Its dire financial situation has forced the Government to take a second stake in the bank, with HM Treasury agreeing to replace the £5bn of preference shares it holds with new ordinary shares.
At 31.75p, an 8.5% discount to RBS' closing price on 16 January 2009, the shares will be offered pro rata to existing shareholders, but is expected to be fully taken up by the Treasury. Its share price is currently down to 24.3p.
RBS has agreed to lend £6bn to industry and homeowners, over and above existing commitments.
Stephen Hester, RBS group chief executive, says the dislocation of credit markets and the global economic downturn continues to "hit RBS hard".
"We are making progress in recognising excess risk and dealing with it. Significant uncertainties and risks inevitably remain," he says.
"In this context, the support we are receiving from Government benefits all our stakeholders and enables us to provide more customer support in return."
Meanwhile, Barclays shares shot up more than 20% this morning after it announced it "knows no justification" for the recent fall in the bank's share price. Barclays says it still expects to post a £5.3bn before tax profit for 2008.IFAonline
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