Scutineer: Who has the Real Credibility Problem - Crombie, or Sir Fred?

Summary

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MUCH has been written about strategic direction and succession issues at Standard Life. But the company with at least as much explaining to do in the coming weeks will be Royal Bank of Scotland. The continuing slide in the group's share price - down 12 per cent in January and down 46 per cent from the pre-credit-crunch high last year - has raised concerns about the dividend and that the company may spring a rights issue call on shareholders for more capital. The shares have now fallen to 388.75p, where the yield is a question- begging 8.3 per cent.

According to research by Citigroup, RBS needs to raise GBP 12.5 billion to shore up its balance sheet and achieve a European average Tier 1 capital ratio. The dividend would appear a tempting economy. The cost of the interim and final dividend combined is running close to GBP 3bn. But weekend press reports suggest RBS chairman Sir Tom McKillop recently met with institutional shareholders to reassure them that the board has no need to cut the dividend or announce a capital raising exercise.

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Scutineer: Who has the Real Credibility Problem - Crombie, or Sir Fred?

However, concerns persist that the group may need to dispose of assets, perhaps including the minority stake in Bank of China. While this stake is showing a good profit, it was acquired for strategic, presence-enhancing purp...

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