On Tuesday, Royal
Bank of Scotland and Lloyds
Banking Group detailed their plans to raise a combined £54.4 billion
of capital and alter their participation in the UK government's
asset-protection scheme. We're placing both banks under review while we
assess the impact of these changes, which still require formal approval
from the European Union.
Of the two banks, Lloyds came out ahead, escaping the asset-protection
scheme altogether in exchange for paying an exit fee of £2.5 billion.
The bank will raise £13.5 billion of new equity, including £5.7 billion
from the government, and will swap £7.5 billion of existing debt into
securities that can convert into equity. Lloyds also said that it has
agreed to sell certain assets, including some Cheltenham & Gloucester
branches. The government's 43% stake in the bank will remain unchanged.
RBS has managed to reduce its participation in the asset-protection
scheme, lowering covered assets to £282 billion from £325 billion,
agreeing to pay a fee of £700 million for the first three years and £500
million thereafter. The government plans to buy another £25.5 billion of
new shares in the bank, increasing its stake to 84%, plus an additional
£8 billion under certain circumstances. RBS has also agreed to sell some
of its businesses and may plan an initial public offering of its
insurance business.
Our Tuesday
market commentary describes how the market reacted to this news. We
will publish our updated analysis of the two banks shortly so be sure to
check back in with Morningstar.co.uk.
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We are reviewing our Lloyds and RBS analysis
Erin Davis, 04/11/09 17:04
The two banks' yet to be approved plans to raise a total of £54.4 billion in capital cause us to reassess our view of the stocks
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On Tuesday, Royal Bank of Scotland and Lloyds Banking Group detailed their plans to raise a combined £54.4 billion of capital and alter their participation in the UK government's asset-protection scheme. We're placing both banks under review while we assess the impact of these changes, which still require formal approval from the European Union.
Of the two banks, Lloyds came out ahead, escaping the asset-protection scheme altogether in exchange for paying an exit fee of £2.5 billion. The bank will raise £13.5 billion of new equity, including £5.7 billion from the government, and will swap £7.5 billion of existing debt into securities that can convert into equity. Lloyds also said that it has agreed to sell certain assets, including some Cheltenham & Gloucester branches. The government's 43% stake in the bank will remain unchanged.
RBS has managed to reduce its participation in the asset-protection scheme, lowering covered assets to £282 billion from £325 billion, agreeing to pay a fee of £700 million for the first three years and £500 million thereafter. The government plans to buy another £25.5 billion of new shares in the bank, increasing its stake to 84%, plus an additional £8 billion under certain circumstances. RBS has also agreed to sell some of its businesses and may plan an initial public offering of its insurance business.
Our Tuesday market commentary describes how the market reacted to this news. We will publish our updated analysis of the two banks shortly so be sure to check back in with Morningstar.co.uk.
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Hemscott is the UK registered trademark of Hemscott Group Limited.
Prices displayed on Hemscott.com are delayed by at least 15 minutes unless otherwise stated.