RBS, British Banks in Discussions on $79 billon Funding Plan (Update1) By Ben Livesey and Poppy Trowbridge
Oct. 7 (Bloomberg) -- The U.K. government may invest at least 45 billion pounds ($79 billion) in three of the country's biggest banks, including Royal Bank of Scotland Group Plc, to bolster capital depleted by mortgage-related losses, three people with knowledge of the situation said. Chancellor of the Exchequer Alistair Darling and Bank of England Governor Mervyn King met late yesterday with RBS Chief Executive Officer Fred Goodwin and his counterparts at Barclays Plc and Lloyds TSB Group Plc to discuss the possible investment, said the people, who declined to be identified because the meeting was confidential. RBS fell as much as 39 percent after Standard & Poor's cut the Edinburgh-based bank's credit rating for the first time in almost a decade, citing its deteriorating financial condition. The government has already bailed out Bradford & Bingley Plc and brokered the takeover of HBOS Plc in the past month on concern about the banks' ability to fund themselves. Darling said yesterday he will do ``whatever it takes'' to keep the financial system stable as capital markets remain frozen. ``The equity markets are saying RBS has the biggest problem but something needs to be done across the board,'' said Simon Maughan, a London-based analyst at MF Global Securities. ``Bond investor confidence in the banks is completely shot.'' Debt Repayments RBS, Barclays, Lloyds TSB and the U.K.'s three other biggest banks need to repay as much as 54 billion pounds of debt by the end of March 2009, just as borrowing costs reach record highs. The total, which includes bonds, convertible bonds and commercial paper, is triple the debt repaid in the same period a year earlier. RBS, the owner of NatWest, has about 11.5 billion pounds of obligations coming due in the next six months, while Barclays has 15.9 billion pounds maturing, according to data compiled by Bloomberg. ``We have categorically not requested capital from the government,'' Barclays spokesman Alistair Smith said. RBS said in a statement today it ``did not make a request to government for capital.'' Edinburgh-based RBS traded down 23 percent at 114.2 pence at 12:55 p.m. in London trading, its lowest value in 13 years. HBOS, the country's largest mortgage lender, declined 14 percent and Lloyds TSB dropped 7 percent. Barclays fell 1.6 percent. RBS Comments ``We have our feet on the ground,'' Barclays CEO John Varley said in a speech at a Merrill Lynch & Co. conference in London today. ``We understand very clearly that the environment is difficult, and that it's quite likely to get more difficult as economies in the world decelerate.'' ``The outlook for 2009 is challenging,'' said Fred Goodwin at the same conference. ``We are delivering against our plans and targets.'' Goodwin made no reference to the bank's share price. An official in Prime Minister Gordon Brown's office had no immediate comment. Last night, his official spokesman Michael Ellam echoed Darling in saying the government would not be giving details of what it is considering. Asked if he could confirm that Darling had met Lloyds TSB CEO Eric Daniels, Fred Goodwin and John Varley last night, a Treasury spokesman said he could not. ``It would be irresponsible to speculate on the specifics of future responses,'' Darling told Parliament last night. ``Providing a running commentary could add to uncertainty. All practical options must remain open to us.'' Lloyds spokesman Mark Lidiard reiterated today that the bank will ``look at opportunities'' to raise capital and it continues to target a capital ratio of 6 percent to 7 percent. He declined to comment on a report by the British Broadcasting Corp. that the bank also took part in the government talks. To contact the reporter on this story: Ben Livesey in London [EMAIL PROTECTED] --~--~---------~--~----~------------~-------~--~----~ Thanks for being part of "PoliticalForum" at Google Groups. For options & help see http://groups.google.com/group/PoliticalForum * Visit our other community at http://www.PoliticalForum.com/ * It's active and moderated. Register and vote in our polls. * Read the latest breaking news, and more. -~----------~----~----~----~------~----~------~--~---
