Royal Bank of Scotland and Lloyds Banking Group are expected to receive GBP31.3 billion in a second bailout from the UK taxpayer, as they agreed to cap bonuses, reported Bloomberg.
The Treasury will inject GBP25.5 billion of capital into RBS, for a total of GBP45.5 billion and fund about a quarter of Lloyds’s GBP21 billion fundraising. The rescue would bring the UK government closer to full ownership of RBS, while Lloyds will escape UK government control.
Lloyds chief executive officer Eric Daniels is expected to raise funds from money managers to avoid the Treasury’s asset insurance plan, which would give the government a majority stake, reported the source.
The UK government is expected to hold its stake in Lloyds at 43% by taking up its rights to buy GBP5.8 billion of stock in the sale. The fundraising is expected to increase Lloyds core Tier 1 capital ratio from 6.3% to 5.6%.
RBS said that the UK government will purchase GBP25.5 billion of “B” shares in RBS to strengthen the lender’s capital. The government may buy a further GBP8 billion of the shares if RBS’s core Tier 1 capital ratio falls below 5%.
Reportedly, Lloyds will cut 600 branches, reduce the bank’s mortgage assets by 19% and its share of current accounts by 4.6%. The bank is also expected to sell Cheltenham & Gloucester- branded accounts and mortgages, its Intelligent Finance online unit, some Lloyds TSB branches and the TSB brand within four years.
RBS will sell 318 UK branches, including its RBS outlets in England and Wales as well as its NatWest branches in Scotland. The bank will also divest the Global Merchant Services unit and shed its stake in its Sempra commodities trading division. RBS said it may also hold an initial public offering of its insurance divisions, reported the news agency.
