BRITAIN'S GOVERNMENT bought a majority stake in Royal Bank of Scotland and Germany's Commerzbank accelerated its takeover of a rival as the shake-up of European banks gathered pace with help from taxpayers and shareholders.
Britain's move was the latest attempt by countries around the world to shore up ailing banks and give them a more solid footing for looming recession.
Shareholders in Royal Bank of Scotland - which owns Ulster Bank and First Active - shunned its share offer, leaving the government to take a 58 per cent stake for £15 billion.
In contrast, Spain's Santander said investors had signed up for all of its €7.2 billion rights issue, which will beef up its capital ratios.
Commerzbank, which has taken €8.2 billion from the German government, cheered investors by saying its purchase price of Dresdner Bank would be €4.7 billion less than first envisaged in August.
Insurer Allianz, which is selling Dresdner and will get an 18 per cent stake in the enlarged Commerzbank, said the takeover could go ahead six to nine months ahead of plan.
"In the current situation on the financial markets, an accelerated takeover of Dresdner by Commerzbank is to the advantage of all parties," said Allianz chief executive Michael Diekmann.
Commerzbank shares surged by as much as 19 per cent on the news.
The DJ Stoxx Europe bank sector dipped 0.4 per cent to 166.3 points, but the index is on course for its strongest week for seven years after falling to a 12-year low last week.
The index has tumbled over 60 per cent this year and investors in many banks have suffered big dilution from fund-raisings, but those banks to raise cash should now be well positioned for the downturn, some investors said.
"The dilution has happened and now that the banks are well capitalised they can cope with the bad debts that are inevitably coming, and now people can look at the underlying businesses," said Alan Beaney at Principal Investment Management, which holds shares in most UK banks.
RBS, one of Europe's biggest banks until losses on risky US assets and last year's purchase of parts of Dutch bank ABN Amro overwhelmed its balance sheet, said investors took just 0.24 per cent of its £15 billion share offer.
A low take-up had been expected due to RBS's depressed share price, leaving the government to pick up almost all the shares.
Stephen Hester, the chief executive of RBS, said: "We regret that existing shareholders did not take up their pre-emptive rights but we understand that market sentiment towards the banking sector made this uneconomic in the short term. We must put the past behind us and move forward with a clear focus on what we need to do next."
- (Reuters/ Financial Times Service)
