Royal Bank of Scotland’s new chief executive today declared she would halve the size of its loss-making NatWest Markets investment bank in a move likely to mean major City job cuts.
The 5000-strong workforce has long feared such a cull as RBS refocuses away from its disastrous past of buccaneering trading and global banking and on to the more traditional work of lending to people and businesses in the UK.
The bank will continue offering services for its commercial banking clients such as foreign exchange, raising debt in the City and managing interest rate exposures, but will stop trading on behalf of asset managers and financial institutions.
Chief executive Alison Rose said the move was a continuation of the efforts of her predecessor Ross McEwan to simplify the organisation and would free up £3 billion of funding tied up in supporting NatWest Markets’ trading to be used elsewhere.
“We are still too complicated for our customers,” she said. “This complexity creates ‘bad costs’ — costs that provide no benefit to customers.”
While she refused to comment on how big the City jobs axe was likely to be, she singled out the rates business as being set for cuts.
Rose announced a flurry of changes at the bank, including a £250 million cost reduction plan from an organisation that already cut thousands of jobs last year. She hinted, however, that there may be some respite from branch closures that have proved unpopular in a business that was bailed out with £45.5 billion of public money in the financial crisis. “We now have over 800 branches, mobile banking vans and access to customers through Post Offices and we think that is about the right shape and size,” she said.
Shares tumbled 5% despite a surge in profits as investors were disappointed at the small final dividend of 1.4p and a cut to Rose’s forecasts for the bank’s profitability this year. She lowered her return on equity target from 12% to 9%-11%, citing Brexit uncertainty. Investors’ disappointment was marked as the bank beat City forecasts with profits for the fourth quarter of £1.55 billion.
Chairman Howard Davies said he had not spoken yet to new Chancellor Rishi Sunak but said Boris Johnson’s government had repeated its aim of selling down the taxpayer’s 62% stake in the bank. “I would expect enthusiasm and energy to be put behind the divestment of the Government’s stake.”