Furious shareholders to learn legal action against RBS still weeks away

Published on Saturday 3 October 2009 13:37

ROYAL Bank of Scotland's private shareholders will be told this week that legal claims against their losses at the struggling bank are still some weeks away from being lodged.

The action group fighting for shareholders' rights will also urge them to have realistic expectations for the shares to recover.

Shareholders will be given an update at a meeting in central London on Saturday. It is expected to be attended by dozens of small shareholders still furious at the downfall of RBS in the wake of former chief executive Sir Fred Goodwin's over-ambitious expansion.

This culminated in the fateful 10 billion acquisition by RBS of businesses in the flawed Dutch banking giant ABN Amro at the height of the 2007 credit crunch as part of a wider consortium bid.

Roger Lawson, a director of the RBS Shareholders Action Group, set up under the aegis of the United Kingdom Shareholders Association, said: "I feel we are some weeks off potentially submitting a claim.

"This is partly because of the accounting complexity in going through the last three years of RBS accounts and SEC filings in the US." That work is being carried out by specialist professor of accounting, Paul Klumpes.

"The main focus is on the 12bn RBS rights issue in 2008 where we believe there were lots of omissions from the prospectus. It was way over-optimistic and the risk warnings were inadequate," Lawson said.

The meeting, which will be in the form of a question-and- answer session, will be held at St Columba's church hall in Pont Street, London, at 2pm.

Lawson said private shareholders continued to be angry at RBS's downfall and the spiral downwards of the share price. RBS's shares closed down 3.91p, or 7.7 per cent, at 46.64p on Friday compared with the 200p rights issue price.

"They are still irate about what happened. The anger has persisted," he said.

However, he added that Saturday's meeting may also be something of a "reality check" for private shareholders about the potential for the recovery in the RBS price.

Lawson said it was unrealistic to expect RBS to return to the level of profits, dividends and share price performance it had in its heyday.

"Some people think that when a share price goes down like this it must bounce back up. But, particularly with the government's 70 per cent shareholding, it's clearly not going to bounce back like that."

The state's stake would rise to 84 per cent if further government shares are issued to insure toxic debt.

The action group meeting takes place against a backdrop of new RBS chief executive Stephen Hester saying he is looking to shrink the balance sheet by up to 40 per cent.