RBS's Goodwin walking a tightrope

By Chris Wills

LONDON (Reuters) - Fred Goodwin, the chief executive of Royal Bank of Scotland known as "Fred the shred" for his cost-cutting, will face a fight to save his own job if he makes Britain's largest ever cash call to investors.

An industry source said on Friday RBS was set to announce a rights issue, which analysts believe could be around 9 billion pounds, to shore up a balance sheet hit by writedowns in the global credit crisis and its purchase of Dutch bank ABN Amro.

The country's second-biggest bank, RBS bought ABN last year at the top of the market and just before the subprime crisis hit. It has since had to take one-off losses on the value of assets related to the U.S. housing market.

As the driving force behind the consortium that bought ABN for about 70 billion euros (56 billion pounds), Goodwin is bound to come under fire if he presses ahead with a capital increase after saying in February it was not necessary.

Paul Mumford, a fund manager at Cavendish Asset Management which owns less than 1 percent of RBS, said Goodwin's credibility would be damaged. "There could well be people saying 'What the hell is going on? We want someone to come in who will drive organic growth,'" he said.

UBS Chairman Martin Ospel fell on his sword earlier this month when the Swiss banking giant unveiled a second rights issue and a massive writedown of ailing assets.

However, Simon Maughan, analyst at MF Global, believes Goodwin will stay on. "The feedback we're getting from investors is while his credibility has been seriously damaged investors think he is needed to steer through the ABN synergies."

"It does feel like he's walking a tightrope," said fund manager Colin Morton at Rensburg Fund Management, whose company has a stake of less than 1 percent in RBS.