RBS steps up with rights issue

They are often seen as evidence of a company's failing strategy and as an implicit demand for shareholders to find extra cash. One of the key downsides to this rights issue is that at least some of the proceeds will, in effect, enter RBS coffers and depart immediately.

However, Simon King, Senior Investment Manager at Gartmore and co-manager of the £148m Gartmore UK Focus Fund, believes that the issue should be viewed positively in an environment of continuing uncertainty about asset quality across the banking sector.

"This should enhance the bank's ability to trade going forward," says Simon. "Following this issue, RBS will be one of Europe's better capitalised banks, with a relatively clean balance sheet."

The broader picture for the bank sector remains uncertain. Recent news from RBS is likely to increase the pressure on other UK banks to seek fresh funding. Banks exposed to toxic debt but choosing not to "grasp the nettle", may find themselves at a competitive disadvantage during the months ahead, especially in terms of achieving short-term funding.

"Hopefully, we can now look forward to substantial benefits coming through as a result of the integration of ABN Amro," adds Simon.