RY Raising Significant Equity Capital

When reviewing RY’s 4Q08 Capitalization, I commented:

Royal Bank needs to do some delevering – an equity issue is indicated, since the Equity / RWA ratio is below that of its peers.

Royal Bank has announced:

it has entered into an underwriting agreement with a syndicate of underwriters for the sale of 56,750,000 common shares at $35.25 per share for total gross proceeds of $2.0 billion. The offering is expected to close on December 22, 2008.

The bank has also granted to the underwriters an over-allotment option to purchase, on the same terms, up to a further 8,512,500 common shares. The option is exercisable, in whole or in part, up to 30 days after the closing. The maximum gross proceeds raised under the offering will be $2.3 billion if the option is exercised in full.

As announced on December 5, 2008, the bank’s Tier 1 capital ratio was 9% as of October 31, 2008. Earlier this fiscal quarter, we issued $525 million of Series AL and Series AN Preferred Shares. On a pro forma basis, adjusting for the issue of Series AL and Series AN Preferred Shares and this issue of common shares, the bank expects its Tier 1 capital ratio will be approximately 9.9%, or 10.1% if the over-allotment option is exercised in full.

This is great news!

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