TD Waterhouse customers take issue with banks

Angus Rigby, Chief Executive Officer, TD Waterhouse comments: "It is no coincidence that Royal Bank of Scotland and Barclays are at the top of our top ten buys and sells this week with both banks hitting the headlines.

"On Tuesday this week the Royal Bank of Scotland announced its plans for the largest rights issue in Europe in a move to top up its capital by raising £12bn from shareholders. The rights issue will allow RBS to rebuild its capital reserves, which have been stretched by the bank's role in leading the £56bn break-up bid for ABN Amro and the ongoing impact of the credit crunch and subprime crisis.

"RBS will offer 11 new shares for every 18 existing shares at 200 pence per share in the underwritten rights issue, representing a 46 per cent discount to the share price at close of play on Monday.

"Tapping shareholders for more cash, while a perfectly legitimate way to raise capital, is never an easy undertaking. The RBS rights issue has already led to a severe reaction from some shareholders who have made calls for an overhaul of the board, including the departure of Sir Fred Goodwin, chief executive, and Sir Tom McKillop, chairman.

"Our customers trading shares this week have obviously been heavily influenced by the news with RBS coming out on top in both the buys and the sells. Some customers will have seen the opportunity to buy into the bank on the strength of longer term performance, while others will have sold out to avoid any further falls. The ratio of sells to buys is almost 2:1, with many customers choosing to sell before Tuesday when RBS shares fell by as much as 6.9 per cent.

"It's a similar story at Britain's third biggest bank, Barclays. Speaking ahead of the company's annual shareholder meeting on Thursday, Barclays Chief Executive John Varley said current market turbulence meant it was a time for banks to strengthen capital ratios. This heightened talk that Barclays will follow RBS's lead with a rights issue. Our customers have been acting on the speculation of a rights issue and on the news that profits at Barclays Capital and Barclays Global Investors were "well below" the strong profits of a year ago.

"And finally, after months of speculation, leading UK banks finally learned today that they have lost the test case into overdraft charging. The banks now have until the end of May to appeal this decision and even then, there is no guarantee when the issue will be resolved.

"This will certainly compound the view that 2008 is turning into a tough year for the UK's big banks. However, by timing their trades well, as we saw with RBS this week, an ‘annus horribilis' for the banks could result in an ‘annus mirabilis' for our customers."