Royal Bank of Scotland Group, the second-biggest UK bank before shares collapsed last week, ousted its chief executive and turned over control to the government in exchange for a £20 billion ($34 billion) lifeline.
Britain will underwrite an offering of shares to investors priced at 65.5 pence and buy £5 billion of preference stock in RBS, the Edinburgh-based company said today in a statement.
RBS is getting more from the government than any UK bank and taking almost all the initial £25 billion that Prime Minister Gordon Brown earmarked last week as the minimum needed to shore up the industry's capital.
Founded in 1727, RBS is the largest bank to be nationalized in Europe, where leaders from 15 countries met last night to guarantee refinancing and use state money to prevent more lenders from going under.
Fred Goodwin, RBS CEO since 2000, lost his job after spending almost $90 billion on takeovers, including €14.3 billion ($19.3 billion) for part of ABN Amro Holding NV last year, just before the credit crunch worsened.
"We regret having to raise new capital but believe that decisive action is necessary in this unprecedented market environment,'' said company Chairman Tom McKillop, who will step down at bank's next shareholder meeting in April.
While the bank was profitable in the third quarter, "the deterioration in economic and financial market conditions" may lead to rising defaults and more asset writedowns in the fourth quarter, RBS said.
New CEO Stephen Hester, CEO of British Bank, will replace Goodwin at RBS.
Investment and corporate banking head Johnny Cameron will step down immediately, and RBS will pay no dividends until it repays the government-owned preference shares.
HBOS, the UK's biggest mortgage lender, and Lloyds TSB Group, the bank that agreed last month to buy it, will also share in the government's £37 billion injection for the banking system.
Barclays, the U.K.'s second-biggest bank, plans to sell more than £6.5 billion ($11 billion) of shares to private investors without turning to the government for help.
Bloomberg