LONDON – Shares in Royal Bank of Scotland Plc (RBS), parent of the Providence-based Citizens Financial Group, fell as much as 39 percent on bailout rumors and news that Standard & Poor’s had cut the parent company’s credit rating for the first time in nearly a decade, according to Bloomberg News.
At 12:42 p.m., RBS shares were selling for $1.642 in New York trading, down 98.7 cents, or 37.5 percent, from yesterday’s close. The Edinburgh-based bank is said to be in talks with the U.K. government, along with other financial institutions including fellow banking giant and Barclays Plc.
The Edinburgh-based bank is said to be in talks with the U.K. government, along with other financial institutions, including fellow banking giant and Barclays Plc that could lead to the government investing 45 billion pounds ($79 billion) or more in the ailing banks to refresh capital depleted by mortgage losses, two people familiar with the situation told Bloomberg. Alistair Darling, U.K. chancellor of the Exchequer, and Bank of England Governor Mervyn King met late yesterday with executives including RBS CEO Fred Goodwin and Barclay’s John Varley to discuss the investment, they said.
“The equity markets are saying RBS has the biggest problem but something needs to be done across the board,” Simon Maughan, a London-based analyst at MF Global Securities, told Bloomberg News. “Otherwise RBS concern will simply move onto Barclays,” Maughan said. “Bond investor confidence in the banks is completely shot.” Simon Willis, a London-based analyst at NCB Stockbrokers agreed that some action is necessary. “Some sort of government guarantee is a sensible measure. … We can’t tell if this will be enough until we get there, but it’s a good first step,” he said.
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At a Merrill Lynch & Co. conference in London today, RBS’ Goodwin did not address the company’s share price. “The outlook for 2009 is challenging [but] we are delivering against our plans and targets,” he told the gathering.
Citizens Financial Group Inc., a commercial bank holding company with about 25,000 employees at 1,600 branches in 13 states and non-branch offices in about 40 states, is owned by the Edinburgh-based Royal Bank of Scotland Group plc. Additional information is available at CitizensBank.com or www.rbs.com.
Standard & Poor’s, a member of The McGraw-Hill Cos., is a provider of financial research, credit ratings and risk analysis. Additional information, including S&P scores for RBS and other bonds, is available at www.StandardAndPoors.com.
