By Margot Patrick
LONDON-- Royal Bank of Scotland Group PLC on Thursday said it
would dismantle its global investment bank and exit 25 more
countries as it announced a seventh annual loss in a row.
Chief Executive Ross McEwan said a series of one-off charges had
hit the bank's earnings last year, including a GBP4 billion
write-down on the value of part-owned U.S. unit Citizens Financial
Group and GBP2.2 billion in conduct and litigation charges. He said
the bank is paying the price for its past ambitions to be a global
investment bank, and now needs to take more radical measures to
make RBS a sound investment for shareholders.
Mr. McEwan said the bank will "substantially reduce" the size of
its investment banking operations in Asia and the U.S., and fully
exit its markets businesses in Central and Eastern Europe, the
Middle East and Africa. Chief Financial Officer Ewen Stevenson said
more than half the jobs will go in the bank's Stamford, Conn.
operation, where the bank employs around 2,000 people on a vast
trading floor. He said the bank's need for that base will also be
reviewed.
"This is a plan for a smaller, more focused, but ultimately more
valuable bank with the vast majority of its assets in the U.K., and
for RBS marks the end of the stand-alone global investment bank
model," Mr. McEwan said.
Outside the U.K., only Singapore and Stamford will host sales
and trading operations. There will be a sales office in Japan, and
client coverage teams in several European countries.
Overall, the 80% government-owned bank posted a GBP3.47 billion
($5.39 billion) net loss in 2014, narrower than 2013's GBP9 billion
net loss. Operating profit was GBP3.5 billion, against a GBP7.5
billion operating loss in 2013.
The bank's shares fell sharply after the announcement, losing
around 3.6% by noon in London as investors digested the bank's
warnings that there could be further fines for past misconduct at
the bank. .
Still analysts welcomed the move to shrink the bank as a way to
reduce assets and improve the bank's capital ratios.
At around 387 pence, the shares are well below the roughly 455
pence price needed for the government to break even on its
investment.
Since requiring a series of government bailouts to survive
2008's financial crisis, RBS has drastically cut its size and
ambitions. It has brought down the number of countries it operates
in to 38, from more than 50 in 2009, and aims to bring that total
down to 13. Last year, it sold a 29% stake in Citizens in an
initial public offering and plans to fully exit the bank by the end
of 2016.
It has been steadily reducing the size of the investment banking
unit for a few years, but Thursday's announcement sent the
strongest message yet that the bank will focus on servicing U.K.
and European clients rather than try to be a force in global
trading markets.
The bank on Thursday named Howard Davies as its new chairman
from Sept. 1, replacing Philip Hampton. It also announced the sale
of a $36.5 billion loan portfolio to Mizuho Financial Group.
Write to Margot Patrick at margot.patrick@wsj.com
Corrections & Amplifications
RBS said it would exit 25 more countries. RBS has brought down
the number of countries it operates in to 38, from more than 50 in
2009, and aims to bring that total down to 13. (An earlier version
of the story incorrectly said RBS would exit around 10 countries
this year. It also misstated that it halved the number of countries
it operates in, to around 25, and aims to bring that total down to
15 or less.)
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