Royal Bank of Scotland is reported this morning to be considering another cash call, in order to avoid the Government’s stake in the troubled bank rising even further.
Currently, RBS is due to create £19.5bn in B shares which it will hand over to the Government in exchange for participation in the Asset Protection Scheme (APS), in which RBS will look to insure around £325bn of it’s most risky assets.
The APS is seen as an expensive way of dealing with toxic assets, and Lloyds is also battling to find a way to limit their participation in it.
This action will take the Government’s stake in the company from its current level of 70% to a massive 84%.
A share issue of around £3bn-£4bn is mooted.
Last year, shareholders in RBS stumped up 200p per share in a £12bn rights issue, only to see their capital obliterated as the shares sunk as low as 10p.
While they have recovered to a current price of around 55p – giving the Government a paper profit on the £1.9bn stake it took in October 2008 – volatility in the share price has tailed off in recent weeks as the market mulls over the options for RBS.
If the cash raise takes the form of a rights issue, it will at least give shareholders the opportunity to ensure that their shareholding is not diluted further.
However, with Stephen Hester adopting a gloomy view of the company’s propects at the recent interim results, many will think long and hard about participating in yet another RBS cash call.