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Royal Bank of Scotland (RBS) down 24%, despite bailout rumors

Today's Financial News - Posted September 29, 2008

Rumors that Royal Bank of Scotland (RBS) will benefit from the U.S. bailout weren’t enough to keep its share price up. The ADR hit $3.04 this morning on news from an ABN Amro partner.

by Stephanie Grimmett

Baltimore — (TFN):  Royal Bank of Scotland (NYSE:RBS) is down 24% this morning on news that Fortis (Brussels:FORB) must sell its stake in their joint takeover of ABN Amro Bank.

The two banks, along with Spain’s Santander (NYSE:STD), bought out ABN last year, spending $101 billion at the pinnacle of financial valuation in the world’s largest (and possibly worst-timed) bank acquisition to date.

Santander took over ABN’s Latin American divisions and thrived, but RBS and Fortis haven’t faired as well in the deal.

Fortis spent $34.4 billion on ABN’s main street banking division, but the credit crisis destroyed the company’s value. As of this morning’s stock price, all of Fortis was only worth about $17.6 billion, half what it paid for the ABN division. And the Belgian, Dutch and Luxembourg governments just announced they will inject 11.2 billion euro (about $16.14 billion) into the bank to prevent insolvency.

As for RBS, the bank already made a $21.7 billion rights issue to its shareholders earlier this year, and rumor has it that the Scottish bank could be one of the largest beneficiaries (to the tune of billions) if Congress pushes through its financial bailout.

But bailout rumors weren’t enough to bolster share prices. The U.S. ADR for RBS was at $3.04, down 24% from Friday’s close, as of 10:45 this morning.

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Posted by Stephanie Grimmett · Filed Under International Investing 

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One Response to “Royal Bank of Scotland (RBS) down 24%, despite bailout rumors”

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