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The Royal Bank of Scotland Group plc Message Board

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  • cdh99 cdh99 Jan 28, 2009 11:18 AM Flag

    Preferred dividends / Update

    In the US write off of goodwill (impairment) is charged to retained earnings.

    But RBS has on their 2007 balance sheet 38 billion in minority interests equity. In 2007 they recorded 23 billion in intangible assets relating to the purchase of ABN.

    Thus it may very well be that any goodwill write off may go anainst the minority interst equity, not retained earnings.

    This would mean that there is still positive retained earnings and justification for paying the preferred dividends.

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    • The 3rd paragraph from the Jan 19 release:

      "Credit and market conditions in the fourth quarter of 2008 were particularly challenging and RBS estimates the Group will report for full year 2008 an attributable loss, before exceptional goodwill impairments, of between £7.0bn and £8.0bn. The Group is currently reviewing the carrying value of goodwill and other purchased intangibles on its balance sheet as part of the finalisation of the year end results. Any goodwill impairments will have no effect on the Group's regulatory capital ratios, and represent non-cash items."

      That is where I got my first impresssion that only the balance sheet is impacted; the fact it is a non-cash item suggests (strongly) that it should not impact earnings.


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