Royal Bank moves to boost capital

Three-month trading for Royal Bank

Royal Bank of Canada has signed a deal to raise up to $2.3 billion in new capital through an offering of common shares.

The bank announced after the close of stock markets Monday that it has entered into an agreement with a syndicate of underwriters for the sale of 56,750,000 common shares at $35.25 per share for a total of $2 billion. The offering is expected to close on Dec. 22, 2008.

The bank has also granted the underwriters an over-allotment option to purchase, on the same terms, up to a further 8,512,500 common shares within 30 days of the closing. If the option is exercised in full, the total proceeds will be $2.3 billion.

"Our capital position is strong and well above regulatory levels, and we are one of the world's most profitable financial institutions," CEO Gord Nixon said in a release.

"However, the world has changed and we want to be conservatively capitalized," Nixon said. "Today's issuance should provide our investors and clients with additional confidence in the strength and stability of our organization, and supports the continued growth of our businesses."

RBC announced in early December that it's Tier 1 capital ratio stood at 9% as of Oct. 31.

It said the common share offering, combined with the issue of $525 million of preferred shares earlier this quarter, will boost its Tier 1 capital ratio to 9.9 per cent, or 10.1 per cent if the over-allotment option is fully exercised.

Shares of Royal Bank closed up $1.10 at $37.50 on the TSX.