RBS, Lloyds TSB and HBOS Nosedive: Investor Hopes Disappear

Royal Bank of Scotland (RBS) fell to the lowest level in 16 years yesterday, with the UK Treasury injecting £37 billion ($55.5 billion) into the UK bank next week it gives little time for investors to regain hope and want to invest in the bank when the stock is deteriorating so rapidly.

RBS, which was Britain’s second largest bank before its market value declined by 89 percent this year, is trading lower than the price the government had underwritten last month for the stock sale.

It’s not only RBS which are below their offering price, HBOS (LON:HBOS) which are the UK’s biggest mortgage lender and Lloyds TSB (LON:LLOY) which are set to take over HBOS are also below. This means the UK Treasury will be forced to take nearly all the stocks the three banks have planned to sell.

Anaylists say that the government will get the whole lot of all three banks, as it would not be beneficial to anyone to take up their rights. Alistair Darling the Chancellor of the Exchequer announced that the government will not move from the terms set out for the stock offering on October 13.

Given that UK banks have seen a 23 percent decline since then, it shows that Mr Darling was hoping to discourage anyone else to come up with a better deal and rally support ahead of the Lloyds TSB and RBS government capital raising vote plans.

Shares in the Royal Bank of Scotland (RBS) today fell 6.7 percent to close on 41.7p, unless investors buy shares in RBS the Government will own around 60 percent of the bank, and with the shares being 36p below the price that was offered to investors through November 25 it’s highly unlikely no one will buy them.

Source: Bloomberg