Royal Bank of Scotland Group Plc, the UK's second-biggest lender, is considering a share sale to shore up capital depleted by credit-related write-downs and its part in the acquisition of ABN Amro Holding NV last year, according to a person with knowledge of the plan.

RBS rose as much as 4.9 percent after reports of the possible rights offer, spurred by capital adequacy requirements and the deterioration of credit assets, said the person, who declined to be identified because no decision has been made. RBS plans to raise at least 5 billion pounds ($10 billion) in a sale arranged by Goldman Sachs Group Inc. and Merrill Lynch & Co., the Daily Telegraph reported Thursday.
``Investors have a choice between a rights issue and growth or no rights issue and no growth,'' said Simon Maughan, a London-based analyst at MF Global Securities Ltd. who rates the stock ``neutral.'' He estimates RBS needs to raise about 12 billion pounds and increase the number of its shares by a third.
RBS, which paid about 72 billion euros ($114.5 billion) with Banco Santander SA and Fortis for ABN Amro mostly in cash, has had its funding cushion eroded by the acquisition and by about 2.6 billion pounds of write-downs. The bank, led by Chief Executive Officer Fred Goodwin, has sold assets and lost more than a third of its market value since the U.S. sub-prime- mortgage collapse sparked a credit crisis last year.
The bank led UK banks in London trading and was up 2.1 percent at 373.5 pence at 8:15 a.m. in London.
Top of the market
“RBS has taken on hundreds of billions of euros in assets at a time when the banks were looking at shifting down,” said Peter Hahn, a former managing director at Citigroup Inc. who is now a fellow at the Cass Business School in London “It bought at the top of the market for a franchise that is slowing down.”
RBS is cutting jobs at its corporate-lending arm, which has been hurt by the slowdown in the leveraged loan market and the collapse in demand for mortgage-backed securities. Sales of high-yield loans, where RBS is Europe's No. 1 arranger, shrank to $6 billion in the first quarter from $130 billion last year, Bloomberg data show.
``RBS notes recent speculation about a possible rights issue,'' the bank said in an e-mailed statement late yesterday. ``RBS confirms that its Interim Management Statement covering trading performance and capital will be made next week.''
Spokeswoman Carolyn McAdam declined to comment beyond the statement.
Many acquisitions
Goodwin, who became CEO in 2000, has been criticized by shareholders for making too many acquisitions that weighed on the bank's share price. Goodwin's takeovers include the $10.3 billion purchase of Cleveland-based Charter One Financial Inc. in 2004 and the 23.6 billion-pound purchase of London-based National Westminster Bank Plc in 2000, the largest in British banking history.
UK banks including RBS and Barclays Plc are scaling back lending amid higher funding costs triggered by record U.S. sub-prime mortgage defaults.
Goodwin and other UK bank heads met with Prime Minister Gordon Brown earlier this month to seek government funds to help unblock credit markets which threaten to undermine the UK housing market.
UBS AG analysts estimated April 16 that the Edinburgh-based bank may need to raise 9.1 billion pounds to bring its capital in line with UK peers.
(Source: Bloomberg)