Financial services major Royal Bank of Scotland (RBS) today said it will raise 20 billion pound by issuing shares to strengthen its capital base, amid deteriorating market condition.
The bank would raise 15 billion pound by issuing ordinary shares in open market at a price of 65.5 pence per share, RBS said in a regulatory filing to the London Stock Exchange.
It would raise another 5 billion pound by issuing preferential shares to the UK government, it added.
"The steps we have announced today, taken in conjunction with the government, will secure a stronger future for the RBS Group. We regret having to raise new capital but believe that decisive action is necessary in this unprecedented market environment," RBS Chairman Tom McKillop said.
Following the recapitalisation, RBS will be one of the best-capitalised banks in the world, enabling us to support our customers, while pursuing our refocused strategic goals," McKillop added.
The filing, however, said Tom McKillop would retire as Chairman at RBS' Annual General Meeting in April 2009.
Further, Chief Executive of the bank Fred Goodwin would step down and be replaced by Stephen Hester, at present Chief Executive of British Land and a non-executive director of the Group, RBS said.
The capital raising would increase RBS's pro-forma core tier I and II ratios by about three and four percentage points respectively, on a proportionally consolidated basis.
And would significantly enhance the Group's financial flexibility in the face of continuing turbulence and uncertainty in the financial markets.
