Financial News

  • 24 February 2014, 7:55

RBS To Pull Out Of Overseas Markets

Royal Bank of Scotland (RBS) is drawing up plans to pull out of dozens of overseas markets as it completes its retrenchment from the global empire-building of Fred Goodwin, its former boss.

Sky News has learnt that RBS is in talks with a number of national banking regulators about withdrawing from many of the 38 countries in which it retains a presence.

Although RBS has offloaded retail operations in a number of countries since its 45.5bn taxpayer bail-out in 2008, it continues to do business in markets as geographically diverse as Australia, China, Italy, Kazakhstan, Romania, South Africa and the US.

It is thought that the plans will not be completed in time to be outlined in detail next Thursday, when Ross McEwan, RBS's new chief executive, will confirm his strategy for the bank.

"There are still discussions ongoing and things are not yet finalised," a source said.

Mr McEwan and the Chancellor, George Osborne, have agreed that RBS should be solely-focused on UK consumers and business customers, while aiding the latter's ability to trade in key international markets.

RBS refused to comment on which overseas operations would be closed or sold, but another source said he would be "surprised if the bank has a presence in more than 15 [of the 38] once the new strategy is fully implemented".

It is unlikely that RBS would withdraw from some key countries such as China or the US, and the insider said that the bank continued to be profitable in many of the 38 existing markets.

A widely-speculated sale of its RBS Securities arm in the US would not be announced as part of next week's review, he added.

Sky News revealed in January that Mr McEwan's new strategy, developed under the codename 'Project Cook', would result in tens of thousands of job reductions from the sale and closure of divisions of the bank.

People close to the RBS review dismissed newspaper reports that between 20,000 and 30,000 jobs would disappear from the bank's existing workforce of about 120,000, saying that the final tally would almost certainly be significantly higher over a three-to-five year period.

That may be partly offset by the recruitment of new staff if Mr McEwan's strategy proves to be successful and it wins a bigger share in its core markets.

The reductions will include 18,500 staff employed by Citizens, the US retail bank which RBS has already announced that it will offload through a stock market listing.

Another 4,500 jobs will be transferred as part of the sale of more than 300 branches to a consortium which includes the Church of England's pension fund.

Mr McEwan plans to emphasise his focus on serving customers through greater automation of banking services, which will also mean thousands of jobs going over time.

In addition, central functions at RBS will also face job cuts similar to those implemented by Mr McEwan while he was running the retail bank.

As Sky News disclosed on Thursday, the restructuring of RBS will involve a reshaping of its corporate bank to focus on small and medium-sized business (SME) customers and major UK-based corporate clients. That will result in Chris Sullivan, chief executive of the corporate bank, moving to another role.

Insiders confirmed on Friday that RBS was not planning to announce the scale of job losses and reductions next Thursday, although it would identify a target entailing billions of pounds being slashed from its still-bloated cost-base.

The new strategy will accompany dire full-year results which are expected to confirm a loss of approximately 8bn for 2013.

In remarks initially reported by Sky News, Mr McEwan said earlier this week that his aspiration was "not to run the world's largest bank; it is to run the UK's best one".

"A lot of our costs are old costs related to a big global group that we are not any more," he said.

"We are too bureaucratic, we take too long (and) we are not focused on the customers' needs. Don't confuse when I talk about taking costs out with how do we serve customers.

"My view is you do both: you serve customers better, and you strip a lot of costs out."

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