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RBS investors “should feel optimistic”

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23/04/2008

Royal Bank of Scotland (RBS) shareholders should feel optimistic about the company’s future after yesterday’s £12bn rights issue, according to the Share Centre.

Nick Raynor, investment adviser at the Share Centre, a share dealing website, said investors taking a long-term view should consider taking up the offer.

“Investors who have stuck with RBS through the recent market turmoil and the ABN Amro acquisition, should feel a little more optimistic about the company’s future, given today’s announcement,” he said.

“RBS has taken the bull by the horns, being the first bank to offer a rights issue on the back of the credit crunch. By doing this they are giving themselves the best possible chance to raise the required capital. It will be interesting to see which banks may follow suit.”

Raynor also explained that the rights issue is fully underwritten, meaning if ordinary shareholders don’t take up the offer, RBS has been fully backed by Goldman Sachs, UBS and Merrill Lynch. “In addition to this, RBS is looking to raise a further £4bn by selling off assets, including its insurance units, such as Churchill and Direct Line. By raising the proposed £12bn this will ensure RBS is on a firmer footing to fight the current economic climate.”

RBS published details of the record £12bn rights issue yesterday. Chairman Sir Tom McKillop said: “This is a difficult time for the financial services industry, and it has presented us with specific challenges.”

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