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NatWest in crisis: shares dive to 10p
Jonathan Prynn and Paul Waugh19 Jan 2009
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SHARES in banks collapsed today as Royal Bank of Scotland unveiled a £45 billion loss — the biggest in British commercial history.
RBS, which owns NatWest, was the biggest faller and by afternoon was down 69 per cent to 10.7p. Two years ago its shares were worth £6.
The other high street banks were also caught up in the turmoil with the Lloyds Banking Group down 26 per cent at 72.7p on its first day of trading since the completion of its takeover of HBOS.
HSBC shares fell 72p to 463.75p and Barclays was 8.8p lower at 89.2p, having started the day higher.
The crisis overshadowed the latest attempt by Gordon Brown to shore up the country's crippled financial system with another rescue package aimed at easing the flow of credit to businesses and families.
Analysts said they were still not convinced that the Government had brought the situation under control and said full-scale nationalisation of major banks may be unavoidable.
The new chief executive of RBS, Stephen Hester, said it was time to “fess up” to the mistakes made during the boom years. The Prime Minister said he was “angry” about what happened at the bank.
David Buik of brokers BGC Partners said: “Sentiment is downbeat with confidence at zero. Frankly, investors are saying they are desperate to see audited accounts, spelling out in words of one syllable the losses incurred by the individual banks in this most important of sectors.”
RBS's disastrous fall was almost entirely caused by reckless lending to foreign borrowers.
The bank said that its core high street and commercial lending activities in Britain had been profitable last year.
However, these were hugely outweighed by losses in its international banking and financial trading arm.
It is also having to write off billions of pounds from businesses bought during an aggressive international takeover spree.
The unprecedented scale of the bad loans and write-offs was laid bare in today's trading statement to the City.
RBS said it lost between £7 billion and £8 billion on its day-to-day lending and trading because of “the sharp deterioration in economic conditions” and “ongoing dislocation in financial markets”.
On top of that RBS said it had paid between £15 billion and £20 billion too much for Dutch bank ABN Amro and other businesses and this would have to be written off.
There is a further “impairment charge” of between ¤17 billion (£15.3 billion) and ¤19 billion (£17.2 billion) related to ABN Amro which RBS bought in 2007.
The official accounts for last year will be published next month. Britain's second largest bank today also unveiled a second bail-out from the Government that will lift the taxpayers' holding in RBS from 58 per cent to 70 per cent through the issue of £5 billion of ordinary shares.
The move is aimed at bolstering the balance sheet, reducing its dividend costs and helping it to start lending more to businesses and home owners.
The Treasury said RBS had agreed to increase lending by £6 billion over the next 12 months in return for the support.
Chief executive Stephen Hester admitted that the bank, which transformed itself from conservative pillar of the Scottish financial community to, according to one measure, the world's biggest bank in just seven years, had made major blunders.
He said: “We did make the situation worse for ourselves by expanding at the wrong time and ABN Amro is a big part of that.
“That was a microcosm of what happened across the world because people became too positive in the bull market.
“We are moving purposefully forward. The first stage is to 'fess up. We are being kept strong in part by the Government. It's our job to allow our customers to stay strong.”
The aggressive expansion policy forged by former chief executive Sir Fred Goodwin is now blamed for the bank's downfall. He was ousted in October and replaced by Mr Hester when it became clear how deep the bank was in trouble.
In the fourth quarter of last year RBS lost £2.8 billion in its global banking and markets division.
A single loan to collapsed Dutch chemicals giant LyondellBasell Industries, part of Russian oligarch Leonid Blavatnik's business empire, has cost RBS £1 billion.
Losses in the US sub-prime and other credit markets are expected to total £8 billion for last year.
The bank warned that the worst was not over yet.
Reader views (44)
I'm concerned about the depositors funds. What's happening to THEM??
- Edgar, vancouver canada, 20/03/2009 23:56
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As an employee of NatWest I proud to work for the company but I am embarrassed to tell anyone that Fred "the shred" Goodwin was my former Boss.He was given a Knighthood "for services to bAanking" This should be taken off him at the earliest opportunity
- Peter, Bradford. England, 23/01/2009 21:46
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As a shareholder in a few of Britain's biggest banks. I have lost £40,000 over the last year alone, and trusted the bankers with my small pension. Brown should be compensating the poor shareholders when he puts their hard earned money in the governments pockets.
- Elaine, Manchester, England, 20/01/2009 12:49
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If you think Gordon's throwing money at the banks then you'd think that some cutbacks might be made. On the 16th of May 2008 the High Court ruled that MPs’ expenses must be published under the Freedom of Information Act.
This Thursday, MPs are voting to change the law to keep their expenses secret after all, just before publication was due and after spending nearly a million of your pounds and seven months compiling the data. Why would the banks behave well when the MP's have their trouts firmly wedged in taxpayer coffers?
- Bob, Cheam, 20/01/2009 10:45
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Paddy. Don't be such a fool. Unless you have more than 50K in there, you don't need to be worried. If people did as you suggest the final consequence will be food shortages and riots as the country collapses into anarchy. Are you a safe cracker by any chance? That's the only thing that might make sense about your comment.
- Mike, London, 20/01/2009 09:48
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solutions.
1. sack everyone (senior management)from top down.
2. the next bail out, instead of the banks, use the money to pay off ALL mortgages, then there will be no mortgage problem.
3. nationalise all banks.
4. start interviewing decent, intelligent people to replace all the greedy, insular, sacked management.
rj
expat in usa,
- Ray Jarvis, marlborough usa, 19/01/2009 22:07
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Scottish bankers and Scottish politicians robbing the English blind
- Richard K, Nottingham, 19/01/2009 21:28
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I think this is just the start of the total collapse of Britannia UK. And the Scots have finally got their revenge after hundreds of years of English repression..I am sure that most North of the Border are happy that the wee sassenach or lowlanders, as we are know, are now picking up the bill as the 'Royal bk of Scotland' and the 'Bank of Scotland' evaporate into oblivion. Thank god we are still lead by Mr. Brown and Mr. Darling who are truly independent and have our interests at heart.
- Bondy, london, 19/01/2009 20:07
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donkeys led by donkeys.
And I think of the arrogant attitudes we have all long had to suffer from ignorant staff in all banks.
We really must sack them all and re-staff the banks with out of work people who really want to do a good day's work and who can act and react with other humans with intelligence - emotional intelligence that is.
- Gordon, mexico, mexico, 19/01/2009 19:48
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Uh oh! Save my current account, Mr. Brown!
- John, London, 19/01/2009 19:42
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Take your money out of Nat West ASAP and any other bank that is having problems. Buy a safe and keep your savings in your house.
- Paddy Mcmurphy, Kilburn, UK, 19/01/2009 19:28
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Reckless lending should be dealt with by criminal proceedings against the senior management, Board included. Brown is the representative of the major shareholder, the British taxpayer, and he should dismiss the management and the Board and institute criminal proceedings.
- Dr Deneys Schreiner, Gloucester, UK, 19/01/2009 19:14
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I am so annoyed at Brown and Darling's incompetence. They tried to pull the wool over the public's eyes with Bailout No.1. Then they tried again with Bailout no.2.
They have left a terrible legacy for my newborn baby girl and my advice to her when she is old enough to understand will be to leave this sinking ship of a country.
- Simon, London, 19/01/2009 19:10
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As an ex Nat West customer I'm frankly amazed they've lasted this long. As a student in the 90's they used to randomly withdraw my overdraft facility and charge me £27.50 for each failed transaction (cheques were resubmitted automatically after bouncing, doubling the fee). On complaining, they would admit that the overdraft had been withdrawn as an "oversight" but refused to refund the monies charged as I should have covered them, I laughed long and hard when my local branch was shut down and turned into a "trendy wine bar".
- Bob, Cheam, 19/01/2009 18:43
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What a con, todays announcement is going to cause more panic and falling values, ask yourself why !
I feel sorry for all the pensioners whose life savings are in some of these companies now falling to nothing.
- Jpg, London, 19/01/2009 18:11
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Does any body think a Tory gov would have acted any differently over the past 12 years ? The genie was let out of the bottle 30 years ago by Mrs.T. and successive governments and and a great many of the electorate have fallen under the spell of its dubious charms ever since.
- Thirsty, Isleworth, London, U.K., 19/01/2009 18:08
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The Bankers' attitude over the past twenty years has been leave us alone we know what we're doing and they have kept their collective snouts in the trough paying themselves exorbitant salaries and on top of that bonuses. Then they turn around and say this disaster occurred because nobody regulated us. Rescue us with taxpayers money. Having been rescued their snouts return to the trough.
- P Lawson, Ilford England, 19/01/2009 17:46
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McBroon and Darling are amazing for their unbounded largesse, at the expense of an unborn generation, to throw money at failed listed companies mired in avarice and incompetence. When is the penny going to drop with are Brit public that the place is bankrupt and that they have been sold down the river?
- Tony Muncaster, Frankfurt, Germany, 19/01/2009 17:33
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and what about their shares tomorrow...... just a small drop (and why wouldnt that happen) and their shares will be zero.
- Rob, Letchworth, 19/01/2009 17:08
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I despair. RBS asked shareholders to purchase more shares last summer at a discounted £2 each and then asked shareholders to stump up more cash at the end of 2008 at 65pence each. I think they have lied through their teeth about the state of the books. Dick Turpin is alive and well working for RBS.
- Terence, Bromley, England, 19/01/2009 17:05
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Willing to swap a bag of marbles, wanted Haunted House or 1000 Natwest shares.
- Stuart, UK, 19/01/2009 16:49
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"Never,in the field of human endeavour, have so many been screwed so much by so few"
With apologies to W. Churchill
- John Coles, London, 19/01/2009 16:43
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I completely agree with 'John' of Canada's view. 'Sir Fred' and cronies have benefitted from paying themselves huge bonuses over the years whilst destoying the bank and other lives.
- Godfrey, london, 19/01/2009 16:38
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RBS's demise is the responsibility of Fred Goodwin (Surely he should have been relieved of the "Sir" months ago?
- Phloss, London, 19/01/2009 16:17
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Well however low it goes you know the UK Gov cannot let it fail as they are too big and own Natwest as well as a large chunk of ABN Amro. Suprised the FSA have not suspended shares as they are now down around 70%. When the tax payers owns 100% wonder if they wil nationalise it! Good business decision when the recovery arrives in around 2 years if you bought RBS cheap now. Would not be surprised if RBS & Barclays merged with Government intervention to create a mega bank and save jobs.
- P, London, England, 19/01/2009 15:45
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"It reminds me of that old black & white film series years ago with Laurel & Hardy"
Now it should be "Laurel, Brown and Hardy" - GB is a perfect fit between the other two even down to appearance!
- David, Lewes, East Sussex, 19/01/2009 15:41
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Sir Fred Goodwin and his former board - by their ambition, greed and poor business sense, have really left a trail of destruction including two British banks (RBS and Nat West)and no doubt much else around the globe. To think that there was a very recent rear-guard action to try to keep RBS independent seems beyond belief. Now, tax payers will have to foot the bill over the coming decades. Should there be a retrospective return of the last 10 years of bonuses received by Sir Fred and his senior management cronies responsible for this mess - or will they be allowed to get away with their ill-gotten gains?
- John W, Canada, 19/01/2009 15:41
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Sadly, thanks to groupthink, politicians keep getting voted into power. If we could just gather the courage to destroy the system, we should be a infinitely better off. It wouldn't take much: a few weeks of civil disobedience and we can get rid of these murdering thieves once and for all.
- Neil, london uk,, 19/01/2009 15:27
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Seems like there is very little confidence in the UK governement financial plans! Pound sterling is also further down again...
- Steveo, London, 19/01/2009 15:09
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Another day, another revelation, another bailout. Will someone give GB his colouring book back because letting him loose in the moneyshop has been a disaster. Blair, Oh Blair why did you let this man get away with bankrupting this country.
- Michael Murphy, brightlingsea england, 19/01/2009 14:59
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re: Dude,
The Labour Government created the mess by their crassness. They said via Boom & Bust Brown there would be no more boom & bust. They put interest rates down when they should have been going up by playing CPI instead of RPI as introduced by Boom & Bust Brown. They told the banks they must lend to everyone no matter whether 'everyone' had the ability to pay! They messed with the bank monitoring system and created the lapdog MPC consisting of Boom & Bust Brown cohorts. Blame those responsible, the cause, not the resulting effect!
Labour 1997-2009; a period of wasted opportunity under undoubtedly the worst government in British history.
- Joe, Thornton Heath, 19/01/2009 14:52
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Why can't we just let them fail like Lehmans. All of the UK's consumer's money is protected - so just let them go.
My company isn't having a great time - but do you think I can just ring up GB and ask for even £100 help?
I hope Fred the Shred is hiding away for good and if he's been able to keep a penny of his pension it's a disgrace. He should be made to put it towards all the shareholders who've lost their money and made to work stacking supermarket shelves for the rest of his life.
- Sn, london, uk, 19/01/2009 14:20
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Certainly as far as RBS is concerned, they are the victims now of their own medicine. We know how it feels - 15 years ago RBS created havoc with our own finances as a result of they mis-selling financial protection insurance to us plus numerous banking errors and mismanagement of our accounts. We lost everything because of RBS and for 15 years we have pleaded with them to see sense and to ask them to rectify. They totally ignored our case and refused even to meet with us or to discuss- and that includes Sir Fred Goodwin. I suppose it's easy to somehow smile at their current difficulties, very much self-inflicted, but rather I'd prefer that now RBS know the taste of their probelms they become more understanding and sympathetic to those like us that have suffered at the hands of RBS over the years!
- Bernard Lockett, Folkestone, Kent., 19/01/2009 14:15
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We are witnessing the collapse of the country and we shall have martial law by December. Food shortages, foreclosures, unemployment and the systematic looting of OUR money by the bankers will lead to riots and civil disobedience. Stand by for a VERY bumpy year.
- Neil, london uk,, 19/01/2009 14:12
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Just imagine the letter send informing them they have gone over their limit
Dear RBS
We write to advise you that your account is over drawn by £45bn. In line with our fees set out in the enclosed booklet, an unauthorised overdraft charge of £35 has been applied to your account. Additionally an instant overdraft charge of £30 has also been applied plus £35 for each item returned as unpaid. At present, 1,227,727 items have been returned unpaid. Unauthorised overdraft interest is charged at 29.5% AER
Please attend to this matter as soon as possible and ensure your account remains within the authorised borrowing limit.
Yours
A. Darling.
- Adam, Harrow, UK, 19/01/2009 13:51
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So the taxpayers 70% of RBS is now worth virtually nothing - well done Gordon/alistair. do you mind if I use my own investment adviser for any future investments of MY money. If you want to invest more in the Banking sector in future can you use YOUR money & not MINE.PS:when you get thrown out of No's 10 & 11 at the next election, I suggest you DON'T consider setting up as an independent investment adviser!!!
- Malcolm, London, 19/01/2009 13:30
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Dude, Your comments are completely true. You have to place them into context though. It was GB when Chancellor who allowed the banks a much freer reign. It was his responsibility both as chancellor and PM to provide the oversight of the banking industry. He was so carried away with his financial miracle that he conflicted. This is his great legacy, he like many others were totally sold on the banks making huge profits - that meant great tax revenue and self congratulation.
There are a huge number of people for whom it was more important to be on the gravy train than making sure the tracks were well services and that the destination was appropriate. Gordon drove that train off a cliff.
This conflict of interests is a reminder of the lack of regard for parliamentary process exhibited by the Labour Government since they came to power. The abuse of privelege is astounding. How anyone thinks he is fit to vote for is beyond me.
He created the train wreck (not the global aconomy - remember he did not give the global economy credit when times were good -- no that was all his own work) and is presiding over the clear-up. I hope he has some sense and finds a small cave to live in when this is over.
- Jon, london,England, 19/01/2009 13:27
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It reminds me of that old black & white film series years ago with Laurel & Hardy:
'Well, thats another fine mess you got me into!'.
Except this time its serious!
- Raj, Birmingham, 19/01/2009 13:19
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Does that mean they get charged for being overdrawn? These bankers have no sense of Corporate Responsibility and have been playing fast and loose with their customers money.
- Dhanraj, Basildon Essex, 19/01/2009 11:50
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RBS should never have bought ABN Amro. ABN was a good, sound bank and has seen its value destroyed by the purchase, which was strategically unwise and tactically foolish. Now that it is more or less nationalised, RBS should pull out of investment banking, derivatives and junk-bond trading.
- Neil, london uk,, 19/01/2009 11:38
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A legacy of "Fred the Shred". Well done.
- Dave Davies, Basingstoke, 19/01/2009 11:27
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Time to start withdrawing out hard-earned pounds, methinks.
- Sarahn, London, UK, 19/01/2009 10:38
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Joe ... why don't you direct to the correct quarters - the banks.
The banking industry should be ashamed of itself. A complete loss of identity/direction/credibility/accountability under THEIR watch.
Looking at it, it is sad that it appears that the rest of us were managing our businesses better than the very banks who who examine OUR books to determine whether WE were credit worthy.
I repeat, they should be ashamed of themselves.
- Dude, London, 19/01/2009 10:35
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Labour 1997-2009; a period of wasted opportunity under undoubtedly the worst government in British history.
- Joe, Thornton Heath, 19/01/2009 10:18
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