RBS, Lloyds get $51 bn in second bank bailout
Jon Menon & Andrew MacAskill
London
Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc will receive 31.3 billion pounds ($51 billion) in a second bailout from the UK taxpayer as the two banks agreed to cap bonuses.
The Treasury will inject 25.5 billion pounds of capital into RBS, for a total of 45.5 billion pounds, making it the costliest bailout of any bank worldwide. The government will fund about a quarter of Lloyds's 21 billion-pound fundraising.
Both banks said they won't pay cash bonuses to workers earning more than 39,000 pounds this year.
The rescue will bring the government closer to full ownership over RBS, while Lloyds will escape government control.
Lloyds CEO Eric Daniels will raise funds from money managers to avoid the Treasury's asset insurance plan that would give the government a majority stake. He's betting bad loans will decline after the Bank of England said the country's recession was nearly over.
In contrast, Stephen Hester, RBS's CEO, will accept greater government oversight and insure 282 billion pounds of his banks' riskiest assets with the Treasury.
"There is now a very fine line between RBS being nationalised," said Danny Gabay, director of Fathom Consulting in London and a former Bank of England economist. "This contrasts with Lloyds willing to fight harder for its independence."
The bailout for RBS and Lloyds follows the 37 billion pounds the two lenders received last year and will bring the government's stake in RBS to more than 84% from 70% today.
Lloyds, the UK's biggest mortgage lender, plans to raise 13.5 billion pounds in the UK's biggest rights offering, and 7.5 billion pounds in exchange offers, the London-based bank said in its statement. The U.K. will keep its stake in Lloyds at 43% by taking up its rights to buy 5.8 billion pounds of stock in the sale.
Directors of both banks will defer their 2009 bonus payments until 2012, the Treasury said. Bloomberg



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