Property financiers get new lifeline under pan-European bailout

Royal Bank of Scotland (RBS) and HBOS are among the list of ailing UK banks set to receive a capital injection under the pan-European bailout scheme agreed by European leaders at the weekend.

Under the rescue operation, designed to restore confidence to the financial markets, RBS will take nearly EUR 25 bn of capital from the UK government, while merger partners HBOS and Lloyds TSB are set to get an injection of nearly EUR 22 bn. Pending the merger deal, the government will take 58% of HBOS and 30% in Lloyds TSB. The banks have been ordered to suspend dividend payments until they are in a position to pay back the public purse.

RBS tops the list of property lenders in Europe with some EUR 128.7 bn in outstanding loans, according to PropertyEU's latest ranking published in August. HBOS takes fifth place with EUR 50.8 bn in outstanding loans, while German bank Hypo Real Estate comes in at number two with EUR 96.2 bn in loans.

In Germany, where the government last week injected EUR 50 bn into Hypo Real Estate to prevent it from collapsing, the government announced a EUR 470 bn package on Monday to prop up its banking sector. France and Portugal unveiled similar bailout schemes. As part of the Europe-wide rescue effort, European countries also agreed to put in place schemes to guarantee interbank lending until 31 December 2009. Meanwhile, individual central banks pledged to grant unlimited amounts of credit in dollars to oil the money markets.

Separately on Monday Mitsubishi UFJ Financial announced the closing of a $9 bn (EUR 6.6 bn) equity investment in US banking group Morgan Stanley. The previously announced investment gives Mitsubishi UFJ - the largest financial group in Japan and the second largest in the world - a 21% ownership interest in Morgan Stanley.

Morgan Stanley has been an active player in global real estate since 1969 and its real estate franchise comprises banking, investing and lending. Morgan Stanley’s real estate operations have over $88 bn of assets under management.