State share in RBS to jump to 84%, say reports
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The government stake in the Royal Bank of Scotland could swell to as much as 84% in return for using the government Asset Protection Scheme, according to reports.
RBS is expected to place £270bn of toxic loans into the scheme and receive a £19bn capital injection from the government, says a report in The Sunday Times.
The Treasury is understood to be making an announcement on RBS’ participation in the scheme later this week.
Should the deal between the Treasury and RBS proceed on these terms, the government stake in the bank will jump from 70% to 84%.
It has also been suggested that the European Commission has ordered RBS to sell its Churchill and Direct Line insurance businesses in order to comply with state aid rules.
It would mean RBS having to get rid of a network of more than 300 branches.
An agreement between Neelie Kroes, the European competition commissioner, and Stephen Hester, cheif executive of RBS, is said to have been hammered out last Friday.
In a statement on the London Stock Exchange this morning, the bank says: “RBS believes it is close to agreement with HM Treasury with respect to its proposed participation in the APS.
“RBS expects the agreement on the APS to reflect market improvements since February and RBS’s ongoing recovery whilst giving protection against future potential stressed case losses.
“With respect to the EC, negotiations between HM Treasury and the EC are in their final stages and will include some divestments not initially contemplated.
“It remains RBS’s goal that any required divestments do not threaten its recovery plan which is already underway.”
RBS says that further annoucments on its participation of the APS and any agreements with the EC will not be made any later than the release of the bank’s Q3 results on November 6.
Lloyds Banking Group, owned 43% by the government, had also originally intended to use the government scheme alongside RBS.
Lloyds Group has now come up with an alternative plan to raise up to £25bn via a rights issue of up to £15bn and a debt-equity swap of up to £10bn.
There has also been speculation that the bank will have get to rid of brands such as Cheltenham & Gloucester in order to meet state aid requirements.
