RBS to cut share numbers to ease volatility

STATE-backed Royal Bank of Scotland wants to cut the number of shares it has on issue to reduce price volatility and enable a more consistent valuation of the bank, it revealed yesterday.

RBS plans to give shareholders one new ordinary share for every ten shares they now hold.

In a letter to shareholders yesterday, the bank said “the company currently has a very large number of issued ordinary shares and, at the current level, small absolute movements in the share price result in large percentage movements resulting in considerable volatility”.

The consolidation would theoretically result in the new shares in RBS, 82 per cent owned by the taxpayer after its rescue bailout in 2008, being worth 233p each based on last night’s closing price of 23.3p. This is below their nominal value of 25p. Its market capitalisation is £13.7 billion, down 60 per cent over the last two years.

Shareholders need to vote on the plan on 30 May. The last day of trading for the existing shares would be 1 June.

It said a “sub-division and consolidation” of shares would result in a share price more appropriate for a company of RBS’s size, which could cut volatility and enable “a more consistent valuation of the company.”

The government, which holds around 39.6 billion RBS shares, would be left with a holding of about 3.96 billion shares. The proportion of its holding would remain unchanged.

TERRY MURDEN