Projo Biz Blog

Royal Bank of Scotland Group Plc, the owner of Providence-based Citizens Financial Group, will sell $23.7 billion of new shares to investors to boost capital depleted by writedowns.

Stock in Royal bank fell as much as 5.7 percent in London trading today after saying it marked down more assets and will cut the 2008 dividend. Chairman Tom McKillop defended Chief Executive Officer Fred Goodwin, saying “our executive team has all the ability to steer the bank through this tricky period in financial markets.”

RBS's capital cushion has shrunk after credit markdowns and its part in last year's $114 billion purchase, mostly in cash, of ABN Amro Holding NV with partners Banco Santander SA and Fortis. The Edinburgh, Scotland -based company said the outlook still is “inevitably clouded” by market turmoil sparked by the U.S. subprime mortgage market meltdown.

“They have overpaid for acquisitions and have had a weak capital base but there's nothing in this statement which confesses that they have made significant mistakes over recent years,” Simon Maughan, an analyst at MF Global Securities Ltd. in London, told Bloomberg News.
“We would like to see disposals from the global banking and markets portfolio which got them into trouble.”

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