ROYAL Bank of Scotland chairman Sir Tom McKillop will join Sir Fred Goodwin in mounting a defence of his job this week when the bank is set to reveal details of its plans to raise as much as £13bn in cash.
As anger over the bank's U-turn on its capital position continued over the weekend, there is growing pressure for one or more heads to roll on Wednesday when the board will face disillusioned shareholders at the bank's annual meeting.
Investors sa
y McKillop and Goodwin will have to make a convincing case for retaining their jobs after they both rigorously denied that RBS would need to raise extra capital earlier this year. News of the cash-raising initiatives was met with calls for resignations from some shareholders on Friday as Goodwin's and McKillop's credibility was undermined.
Sources close to the bank said RBS board members are meeting to thrash out the plans this weekend, with a rights issue and a sale of its general insurance companies Direct Line or Churchill also up for grabs. It is thought the sale of Direct Line and Churchill, which RBS views as less critical to its core banking strategy, would raise as much as £5bn.
The rights issue, which could be launched as early as Tuesday or Wednesday, is likely to break UK banking records. Even if RBS raises the £9bn at the bottom end of analyst predictions, it would vastly overshadow the £5.9bn raised by British Telecom in 2001.
To add to McKillop's and Goodwin's woes, analysts say RBS will also be forced to report further credit crunch-related write downs of between £4bn and £5bn on Wednesday. Citigroup was forced into a similar move on Friday when it revealed a $5.1bn loss in the first quarter of this year, a figure which reflected £16.9bn in sub prime-related write downs.
Latest estimates place the sum that RBS needs to raise in order to boost its capital reserves, close to £13bn. The balance sheet was stretched to the limit after the ?71bn (£56bn) joint takeover of Dutch rival ABN Amro. Goodwin in particular attracted criticism for pushing ahead with the buy-out last October after the credit crunch had already led to substantial devaluations in global banking stocks.
Some analysts suggest that RBS may have been cajoled into the U-turn over raising capital by the Financial Services Authority, which is understood to have been talking to the major banks, including RBS, Barclays and HBOS about their capital reserves.
And the City is expecting a string of banks to follow RBS's lead over the next few weeks, with Barclays and HBOS named among the prime suspects. RBS shares closed up 5% at 374p on Friday in anticipation of the rights issue.
The full article contains 469 words and appears in Scotland On Sunday newspaper.
