Heavy losses force RBS into $23.9B rights issue

LONDON, England (AP) -- Royal Bank of Scotland Group Tuesday announced a £12 billion ($23.9 billion €15.1 billion) rights issue to shore up its capital position after suffering heavy losses from the U.S. subprime mortgage crisis.

RBS also disclosed that it expects further write-downs on mortgage-backed securities and other assets of £5.9 billion pounds ($11.7 billion; €7.4 billion) before taxes, or £4.3 billion ($8.6 billion; €5.4 billion) net.

The company said it would offer 11 new shares for every 18 existing shares at 200 pence ($3.98; €2.51) per share. The move is a blow for existing shareholders, as they must either put up more money or see their holdings diluted.

RBS shares fell 2.5 percent to 363.25 pence ($7.23; €4.56) in early trading on the London Stock Exchange.

The company joins Citigroup, Swiss bank UBS and other big financial institutions in being forced to write down billions in assets and turn to investors for more capital as a result of the U.S. troubles.

"Following the rights issue, RBS believes that it will be in a strong position to realize the substantial value in its UK and international franchises and to take advantage of the growth opportunities available to it," the company said in an announcement to the London Stock Exchange.

RBS said it also intends to dispose of its insurance business and other unidentified, smaller assets.

RBS, Britain's second-largest bank by market capitalization, stretched its cash reserves last year in leading a consortium including Belgian-Dutch group Fortis and Spain's Banco Santander in the takeover of Dutch giant ABN Amro Holding NV. Then it was hit by the freeze-up of the market in securities based on mortgages.

The bank said it had raised its targets to maintain a Tier 1 capital ratio of between 7.5 percent and 8.5 percent and a core Tier 1 capital ratio in excess of 6 percent.

"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," said RBS' chairman, Sir Tom McKillop.

"It was the board's declared intention to rebuild our Tier 1 capital to the middle to upper end of our historic range of 7 percent to 8 percent over a three-year period, but in light of the current market environment, this level and timing are considered no longer appropriate," McKillop said.

RBS Group's retail operations in Britain include the Royal Bank of Scotland, Ulster Bank and Natwest. E-mail to a friend

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