Royal Bank of Scotland is to receive additional capital injections of £25.5bn from the UK government, the bank revealed today.
The bank is to benefit from the government’s asset protection scheme (APS) in a deal which will bring the total amount of cash the stricken lender has received from the Treasury to over £45bn.
The scheme will enable the bank to offload £325bn of assets into the scheme. It has agreed to take a first loss of up to £19.5bn on these assets. 90% of the remaining losses will be shouldered by the government with RBS picking up the tab for the rest.
News of the additional bailout came as RBS announced losses for 2008 of £40bn before tax – the biggest loss in UK corporate history. Its net loss of £24.1bn was substantially higher than the previous UK corporate record loss of £14.9bn.
Of the losses, £16.2bn were goodwill write-offs due to the acquisition of Dutch bank ABN Amro in 2007.
In 2007, RBS recorded a profit of £9.9bn.
Under the latest rescue plan, the government, which already owns almost 70% of RBS, will inject £13bn into the bank immediately in return for non-voting B shares. Following that it will provide the bank with an additional £6bn to be dispatched at the request of the bank.
The government will also help RBS pay the £6.5bn in fees to participate in the scheme. It will do this by investing £6.5bn for more B-shares.
Chief executive Stephen Hester said the deal would “assist us in reducing risk for shareholders whilst providing greater support for UK customers via increased lending.”