London - The Royal Bank of Scotland (RBS) Tuesday became Britain's first major lender to ask shareholders to help rebuild its capital base through a record 12-billion-pound (24-billion-dollar) rights issue in a move likely to be followed by other top banks hit by the global credit crisis. Edinburgh-based RBS, Britain's second biggest bank, also revealed fresh write-downs of 5.9 billion pounds resulting from its exposure to high-risk loans and investments.
RBS said it would raise the sum by issuing shares at 200 pence each - which represents a 43.6-per-cent discount on Monday's closing price of 352.5 pence - in what analysts said was one of the biggest rights issues in British corporate history.
The losses announced as a result of exposure to the US subprime mortgage market are the highest yet recorded by any British bank, and come on top of write-downs of 2.4 billion pounds already announced by RBS.
RBS chief executive Fred Goodwin, who had earlier ruled out the possibility of turning to shareholders for help, said Tuesday that the huge cash injection was the "right way forward" for the bank.
"Given the change we have seen in the world, it's just the right thing to do - I'm absolutely convinced about that," said Goodwin, who has in the past few years presided over a massive expansion of the bank's assets and acquisitions.
Analysts said Goodwin, who took home an annual pay package of 4.2 million pounds in 2007, could face a stormy shareholder meeting in Edinburgh, the capital of Scotland, Wednesday.
Analysts said RBS' problems are linked in equal measure to the crisis sparked by the US subprime market as to the 50-billion-pound takeover of Dutch bank ABN Amro masterminded by Goodwin last year.
RBS also bought British bank NatWest and took a 10-per-cent stake in the Bank of China in 2005.
RBS shares, currently worth half their value a year ago, fell by one pence on the London stock market Tuesday, but the impact of its statement ahead of the shareholder meeting dragged down the share price of other vulnerable British banks.
It is expected that Barclays Bank and Halifax Bank of Scotland (HBOS) will be next in line to appeal to shareholders for funding, analysts said.
Shares in Barclays, said to have a capital hole of 8 billion pounds, dropped by 4 per cent Tuesday, as HBOS' shares dropped by 5 per cent. The bank is believed to have a shortfall of 11 billion pounds.
Analysts at JP Morgan said Tuesday that four of Britain's biggest banks were facing a combined shortfall of 37 billion pounds in capital funding.
Meanwhile, RBS said Tuesday that it was also carrying out a "strategic review" of its insurance arm, which could potentially involve a sale yielding up to 5 billion pounds.
The British government Monday called on leading banks to reveal the full extent of their losses on mortgages and investments related to the subprime crisis, as the Bank of England injected a massive 50 billion pounds into the banking system in an effort to stimulate lending in frozen money markets.
