RBS defends £12bn rights issue

The Royal Bank of Scotland has defended its decision to launch an unprecedented £12bn rights issue today.

The launch involves issuing 11 new shares for every 18 existing shares at 200p per share.

A statement from the company says the overall underlying performance of the group has remained satisfactory with the main exception of a slowdown in capital markets activity in global banking.

Sir Tom McKillop, chairman of RBS, says: “This is a difficult time for the financial services industry and it has presented us with specific challenges.

“Central to these has been the question of our capital ratios, which have been the focus of much attention, both internal and external, over recent months.”

He says it was the board’s declared intention to rebuild its Tier 1 capital to the middle to upper end of its historic range of 7% to 8% over a three-year period.

But he adds: “In light of the current market environment this level and timing are considered no longer appropriate.

”In discussions with shareholders it was clear that many of them had reached a similar conclusion, hence today’s announcement that we are launching a rights issue to reposition our capital ratios and strengthen our capital base.

“Naturally, shareholders wish to understand what we have assumed in relation to the prospects for further writedowns and disposals of non-core assets, and today’s announcement seeks to clarify the basis of our capital planning.”