June 6, 2008 – 9:30 am

The Royal Bank of Scotland is gaging on its consumption of ABN Amro and the subprime binge of the housing bubble. The bubble has long since burst, but like any junkie, there is no such thing as too much, and his royal highness can’t get enough.

Royal Bank of Scotland Group Plc may have less capital than its largest peers and go back for more after raising 12 billion pounds ($23.5 billion) in Europe’s biggest rights offering, according to Deutsche Bank AG.

RBS paid 14.3 billion euros ($22.4 billion) for part of Amsterdam-based ABN Amro in the world’s biggest banking takeover. A third of this year’s writedowns stem from that acquisition.

And while the rights issue is being touted as a success the fact that the bank was forced to go to the Street begging is by it’s very nature not a success. Furthermore, the bank did not raise enough capital, which is unsuccessful by definition.

“I’m not convinced that is a high enough level going into a post-credit crunch world,” said Robert Talbut, chief investment officer at Royal London Asset Management, which owns RBS shares. “I still think there is a risk they will need to raise capital.”

And so the take down of Amro just keeps on taking RBS down while leaving untouched the big commission winners and CEO Sir Fred Goodwin.

The successful fundraising was a reprieve for Sir Fred, the bank’s chief executive, and embattled chairman Sir Tom McKillop, who have come under heavy fire since stunning the City with the plan in April.

James Hamilton of Numis Securities said: ‘It looks like the rights issue has got away. But I’m not sure Sir Fred is off the hook. Ultimately he has to take full responsibility for buying ABN absolutely at the top.’

If anyone seriously thinks that Goodwin will be held accountable, here is the living proof that they are wrong: HE’S STILL THERE!

It’s too bad that instead of investors just going on strike against RBS, they gobbled up the shares neither smelling the blood nor seeing the dilution of their own interest. This is like a snake that eats its own tail and we will witness plenty of this spiral as the post-bubble world unwinds.


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