RBS considers cash call

Part-nationalised Royal Bank of Scotland is weighing up a new fundraising to prevent the taxpayer's stake in the ailing bank from rising further, it was reported today.

Chief executive Stephen Hester has begun informal talks with investors over a possible cash call, the Sunday Times said.

Mr Hester is said to be considering the move to pay the 19.5 billion fees due to the Government to take part in a taxpayer-backed insurance scheme for more than 300 billion in toxic assets.

Under a draft agreement published in February, the bank is due to pay this fee with new shares to the Government – taking the taxpayer's stake from 70% to 84%.

But with the recent recovery in stock markets, Mr Hester is reportedly testing the appetite for a fundraising move which would raise the cash from outside investors and keep the Government's stake pegged at 70%.

The FTSE 100 Index is now around 50% above its lows in March, with RBS up at 55p after plunging as low as 10p in January.

This currently gives the taxpayer a paper profit of 1.9 billion on its stake in the bank, which declined to comment on the report.

The news comes after Lloyds Banking Group – in which the Government owns 43% – confirmed it was also looking at alternatives to taking part in the Asset Protection Scheme (APS).

Lloyds, which has been hit by the toxic loan book inherited from its rescue of HBOS, originally planned to put 260 billion of debt into the scheme.

It said on Friday it was looking at changes to the commercial terms, including the possibility of reducing the amount of assets covered by the scheme, or pulling out of it altogether and raising funds from the market instead.

The complex negotiations over both banks' participation in the APS are subject to state aid approval from the European Union and are unlikely to be completed before the autumn.

But European officials could demand that the pair sell off parts of their businesses in return for taxpayer support.