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November 4, 2008    

RBS hit by further write-downs

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by Kay Murchie

Royal Bank of Scotland (RBS) has today announced an 8% fall in operating profits and stated that the economic slowdown will affect its financial results for the final quarter of the year.

Furthermore, the bank has 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.

RBS, which is one biggest victims of the credit crisis, is seeking to raise £15 billion through offering new ordinary shares to investors at 65.5p each.

Back in June, RBS raised £12 billion in what was the country’s biggest rights issue, and has announced today that it will issue £5 billion in preference shares to the Government, which will purchase the stock using taxpayers’ money, leaving the Government owning approximately 60% of RBS.

As part of the Government bailout, which will see Lloyds TSB and HBOS receive £17 billion from the Government, the terms will see a restriction on executive pay and dividend payments.

Incoming chief executive, Stephen Hester, has pledged to refocus RBS and said he needs to re-gain the confidence of shareholders and customers.

Mr Hester warned that in order to survive the economic downturn, underperforming divisions could be sold off but did not disclose how many RBS employees would be at risk of losing their jobs as a result. The bank has a workforce of 170,000.

This morning, shares in RBS fell to 59p, suggesting that the Government may be left holding most of the rights issue.

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