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 edged closer to shedding state support with a
smaller net loss in 2014.
The 80% government-owned bank posted a GBP3.47 billion ($5.39
billion) net loss, narrower than 2013's GBP9 billion net loss.
Operating profit was GBP3.5 billion, against a GBP7.5 billion
operating loss in 2013.
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. He declined to say how many jobs will go in
the bank's U.S. operation, where the bank employed around 2,400
people as of last year, many of them on the vast trading floor in
Stamford, Conn.
"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.
Analysts welcomed the move as a way to reduce assets and improve
the bank's capital ratios. But the bank's shares fell 4% after
investors digested the bank's warnings that there could be further
fines for past misconduct at the bank.
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 halved the number of countries it operates in, to
around 25, and aims to bring that total down to 15 or less. 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. An earlier version of
the story said RBS would exit around 10 countries this year.
(Feb.26, 2014)
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