The growing list of banks recapitalising themselves shows no sign of stopping as the number of German banks failing continues to mount.
Overnight we had confirmation of moves to recapitalise the ailing Royal Bank Of Scotland in a series of deals that could raise a total of $US42 billion, which will be the largest recapitalisation so far.
RBS is going to dilute existing shareholders by raising almost $US24 billion in new capital: it plans to issue 11 new shares for every 18 existing shares at 200 pence a share. That’s a huge 46.3% discount to Monday’s closing share price of 3.72 pounds.
It also revealed plans to write down almost $US12 billion in non-performing assets and is reportedly in the process of selling assets, such as Angel Trains and two insurance operations, that could raise another $US16-18 billion.
In the US, Citigroup yesterday sold $US6 billion in so-called hybrid stock that qualify as debt and equity and this morning Merrill Lynch revealed plans to raise up to $US9.55 billion through the sale of bonds and new preferred shares. Figures released overnight by the US Federal Reserve show that it has provided a total of $US360 billion in short-term loans to American banks since December to help them overcome credit problems. This is on top of the $US200 billion the banks have raised in the same time.
The Fed funding is part of an ongoing effort to try and ease the credit crunch. It is also exchanging US Treasuries for lower rated mortgage and similar securities.
And the German banking industry association (called BdB) has taken over a privately-owned bank specialising in public sector lending.
The Duesseldorfer Hypothekenbank AG bank had around $27 billion in euros in assets, according to German media reports. The BdB said it did not expect the Duesseldorfer Hypo to be shut down. It should be recapitalised and sold.
The German financial-market regulator BaFin earlier this month ordered Weserbank AG, a small north German bank, to be closed, while a state-owned bank in Saxony was bailed out and another state bank in Bavaria has revealed total losses of around $US6 billion in the past six weeks.