Lloyds Banking Group
announced a record share issue while rival
Royal Bank of Scotland
outlined plans to sell assets in order to satisfy European Union regulators.
Lloyds said it will not participate in the British government's Asset Protection Scheme, instead choosing to raise 21 billion pounds ($34 billion), including 13.5 billion pounds in the share sale and 7.5 billion pounds in exchange offers.
The Asset Protection Scheme would have increased the British government's stake in Lloyds to about 62% from 43% and cost the bank 15.6 billion pounds in fees, according to
. The government is now set to provide 5.8 billion pounds in a second bailout for the U.K. bank.
With the share sale, Lloyds will pay a fee of 2.5 billion pounds for the "implicit protection" already provided to the bank over the last eight months.
Lloyds will also sell a retail banking business with a 4.6% market share of the U.K. current account market and about 19% of the group's mortgage balances. The bank's asset sales will also include the Cheltenham & Gloucester mortgage business and its Intelligent Finance division.
Meanwhile, Royal Bank of Scotland will not be able to dodge government control the way Lloyds has, as it is set to participate in the Asset Protection Scheme under revised terms. The bank will receive a second cash injection from the British government, this time totaling 25.5 billion pounds.
Under the revised terms, RBS will take a greater potential loss on a portfolio of toxic assets of 60 billion pounds, up from 42 billion pounds. The Asset Protection Scheme will insure 282 billion pounds of loans and investments against any losses. The British government's stake in RBS will rise to 84.4%, although voting rights will remain at 70.3%.
The bank will also be forced to sell of multiple assets. RBS said it plans to sell its RBS branch network in England and Wales and NatWest branches in Scotland, RBS Insurance, Global Merchant Services and its interest in RBS Sempra Commodities.
-- Written by Robert Holmes in New York
Follow Robert Holmes on
and become a fan of TheStreet.com on