Shareholders continue struggle for compensation

12 October 2009

Almost one million former Bradford & Bingley shareholders will learn of the outcome of their fight for compensation by next June.

Shareholders continue to nurse their losses following the nationalisation of the troubled lender in September 2008. They face the prospect of receiving almost nothing for their shares if the valuer, Peter Clokey of PricewaterhouseCooper, decides that Braford & Bingley was on the verge of collapse just before the government swooped in.

Just days before it was nationalised, the value of its shares fell to just 20p from a high of around £3 during the previous 12 months. Clokey has been appointed by the government to value the lender on what the group was worth immediately before it fell into the arms of the state - without taking into account the financial assistance it received from the Treasury and the Bank of England.

Clokey gave worried shareholders a definite timeframe at a meeting in central London on Saturday (12 October). "I believe, as I stand here today, that I will have issued my ruling within a year of my appointment - so by the end of June, next year," he said.

However, Clokey refused to be drawn on a potential figure, claiming he did not want to "set any hares running" by predicting its final value.

His announcement did little to assuage the angry shareholders - who have accused the government of "legalised theft". They claim they have not been given an explanation for the group's nationalisation.

David Blundell, chairman of the Bradford & Bingley Shareholders Action Group, says he had been in contact with hundreds of investors who have lost out following the bail-out.

He adds: "The outrage amongst you has been palpable. I have fielded hundreds and hundreds of emails and letters and I cannot emphasise how strongly the feeling out here is. It has been described as 'legalised theft'."

The group could take legal action if it feels the level of compensation offered is unfair.

Royal Bank of Scotland

Meanwhile, disgruntled Royal Bank of Scotland (RBS) shareholders are planning a potential £9 billion lawsuit against ex-boss Sir Fred Goodwin and other directors of the part-nationalised bank.

Dozens of investors turned up at a meeting in London on 12 October to consider claims that last year's prospectus for the bank's £12 billion rights issue contained "significant errors and omissions".

Campaigners from the RBS Shareholders Group say this 'misled' investors by underestimating the risks facing the bank, which is now 70% owned by the taxpayer.

All the directors on the board at the time of the buyout will be targeted by this action, according to Roger Lawson of the RBS Shareholders Group, which is working on behalf of around 7,000 investors.

Many shareholders have lost thousands of pounds following last year's mammoth cash call priced at 200p a share. On Friday (9 October) the shares closed at 48p having fallen as low as 10p back in January.

During the meeting, private investors said they felt let down by the management of the bank.

Mr A Burrows of Tunbridge Wells, who has owned RBS shares since the 1980s, said: "It is almost a betrayal of the shareholders in the way that he [Sir Fred] has been let off the hook."

A fellow shareholder, who lost thousands of pounds, added: "The way they [the directors] all behaved was reckless and disgraceful. It's not just about the money but showing them they can't get away scot free for the very bad decisions they made."

Back in May last year around 100,000 investors took part in the cash call. Many analysts and financial advisers backed the rights issue at the time amid a very confident outlook from the bank contained within the prospectus.

It said: "Following the rights issue RBS believes it will be in a strong position to realise the substantial value of its UK and international franchises and to take advantage of the growth opportunities available to it."

There was subsequently a 95% take-up of the shares on offer.

However, Lawson claims that the group's balance sheet was under pressure in 2007/08 even before the disastrous acquisition of Dutch banking group ABN Amro, a financial position of which the directors must have been aware.

"It is likely that the fundraising was more of a bail-out to cover the cost of the ABN Amro acquisition and looming financial problems and further toxic asset write-downs rather than the spin put on it," the action group said.

Lawson admitted that it is still "very early days" in the fight for compensation. The group is currently gathering information to see if there is a case for making a claim and has hired forensic accountant Paul Klumpes.

The threatened action is one of a number of lawsuits faced by RBS in Britain and the United States after it had to be bailed out by the UK government during the financial crisis. In 2008, it reported a record £24.1 billion loss.


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