RBS chairman rocked by stinging attack over £12bn cash call

RBS chairman rocked by stinging attack over £12bn cash call

Sir Tom McKillop launched an emotional defence of his chairmanship of Royal Bank of Scotland today after a stinging attack by a shareholder at the bank's annual meeting held after yesterday's announcement of a recordbreaking £12bn cash call.

Accused of being a pharmacist rather than a banker, McKillop's voice wavered as he described himself as a mathematician with 14 years' experience as a chief executive. He took the non-executive role at RBS after leaving drugs company Astra Zeneca.

Along with RBS chief executive, Sir Fred Goodwin, McKillop is facing pressure from City investors for asking them to support the biggest rights issue in corporate history just weeks after assuring them that a fundraising exercise would not be necessary.

McKillop fielded questions about the rights issue, the future policy for the dividend and criticism of executive pay, but Goodwin spoke only once during the meeting in Edinburgh to say the decision to embark upon the cash call was "a painful decision and unwelcome decision but I personally believe it is the right decision".

McKillop told the City yesterday there would no sacrificial lambs to pay the price for the rights issue which is needed to boost the bank's capital cushion following a fresh £5.9bn credit crunch writedown. The bank's capital was already thin following the recording breaking takeover of parts of Dutch bank ABN Amro last year.

The bank's shares closed today at 345p down 13p. They.....continued below

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are trading at half the level they were a year ago before the credit crunch dramatically changed the outlook for bank shares.

Investors are being asked to pay 200p to back the 11 for 18 rights issue. Other bank shares were weak today on speculation they will also have to tap their shareholders for cash.

The bank, which owns NatWest, is also considering selling its insurance arm which includes Direct Line and Churchill to raise a further £4bn.

One big City investor said the bank had effectively "run out of money".

To make the rights issue as attractive as possible to shareholders - who are furious at what they regard as a change in strategy by the bank's board - it is heavily discounted. Shareholders are being asked to pay 200p a share for 11 new shares for every 18 they already own. Goodwin owns 700,000 shares and will have to stump up more than £800,000 to support the cash call.

Investors are being asked to dig into the pockets at a time when the bank is also paying out a final dividend of 23.1p a share – at a cost of more than £2bn. They will vote on the dividend at today's annual meeting, when they will also be told that the interim payout this year will be in shares rather than cash.

Investors who attended last year's meeting may reflect upon the difference a year makes. Then, RBS outlined its plans to bid for ABN Amro, which had initially agreed to be taken over by Barclays. RBS eventually took control of ABN Amro in a consortium that included Santander of Spain and Dutch Belgian financial services group Fortis.

That takeover is one of the reasons that RBS is now needing to shore up its finances. McKillop admitted yesterday that the timing was "unfortunate".

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