It’s a fair bet that Royal Bank of Scotland’s Ross McEwan will be off the guest list for the next get together of Britain’s top bankers.
Let me explain: having repeatedly given up bonuses to appease a public that, in the wake of a seemingly endless parade of ghastly scandals, questions the legitimacy of paying seven-figure sums to banking executives, this was the year they were all supposed to say: Enough! We’re getting paid because, as that L’Oréal ad says, we’re worth it. And yah boo sucks to you if you don’t like it.
Unfortunately for them, Mr McEwan had gone and put a million-pound hole in the wall of their dam by saying that he’s was giving up his role-based allowance that was approved by shareholders last year.
For the uninitiated, that’s the extra chunk of pay cooked up by the industry to get around the EU’s bonus cap and keep executives in the style to which they have become accustomed.
It’s not technically a bonus (although the European Banking Authority thinks it is). So Mr McEwan is not technically letting the side down by saying thanks but no thanks.
Except that he is. Because he’s still passing on a big portion of his remuneration, one that is arguably more important at RBS than it is at the other banks because it is the only one of them that isn’t allowed to pay its top staff 200 per cent of salary in bonus under the EU rules. To do that, you need to get a supermajority of shareholders to vote in favour. That can only be secured by RBS if the Government votes the taxpayers’ stake in favour, which won’t happen in the run-up to an election.
Why has Mr McEwan let the side down like this? Well the latest set of results do show progress. But the bank still made a £3.5bn loss and even though some bits of it are doing quite well, the public will be inclined to ask why anyone is getting a payout in the face of that sort of result.
Although the bonus pool has been reduced by a fifth, Mr McEwan’s decision helps to draw some of the attention away from that, and is politically astute during an election year. It certainly stands in stark contrast to the behaviour of his opposite number at HSBC, Stuart Gulliver.
The decision to further cut back the bonus-happy investment bank – RBS is withdrawing from 25 countries – is similarly sound, and from a business as well as a political standpoint. It will free up capital that can be deployed for lending to support the British economy, something taxpayers will feel RBS should be doing given the damage it inflicted during Fred Goodwin’s misrule.
Mr McEwan’s peers may be throwing darts at him when they convene the next session of Britain’s money Parliament, but that shouldn’t trouble him much. RBS might still be on the naughty step. With £2.2bn in fines and compensation payments last year and concerns over the Germans opening an inquiry into the Swiss operations of its up-for-sale private bank Coutts International, it couldn’t be anywhere else. But thanks to HSBC’s Swiss shenanigans, it’s probably fair to say it’s no longer the worst kid on the banking block.
Lending to businesses is falling when it’s needed most
More business lending from RBS is desperately needed. And from its peers. Unfortunately, figures from the Bank of England show lending to small businesses by banks taking part in its Funding for Lending Scheme fell by £800m in the fourth quarter.
The Bank said the rate of decline is slowing, but that’s not much consolation.
At the same time, we learned that British business investment fell at its sharpest rate in nearly six years at the end of last year. Is there a link? Perhaps, although the latter was partly down to falling global oil prices, which hit the North Sea.
There have been signs that the economy is starting to motor again, helped by that cheap oil. But if the recovery is to maintain momentum, business needs access to credit.
The problem is that many will feel safer sitting on their hands. No one can predict the outcome of the forthcoming general election and that alone would be a good reason to pause for breath. Unfortunately, with the prospect of another coalition, and perhaps a referendum on EU membership, such a boost isn’t likely anytime soon.
Shareholders are betting on a return to form at Ladbrokes
Christmas was anything but merry at Ladbrokes and you might think the new year isn’t proving to be much happier. So why are investors pushing the shares up faster than Sprinter Sacre at his finest?
Discount the bookie’s Boxing Day disaster, during which football punters kicked an £8m hole in the numbers thanks to a run of winning favourites. Savvy investors will be aware that is just part of the business. Of more concern to them might be tax and regulation, particularly on fixed-odds betting terminals.
What they have woken up to is the fact that behind the scenes Ladbrokes is reaping the rewards from bringing its online offering and its tech into the 21st century.
There isn’t much love for chief executive Richard Glynn in the City. But he’s on his way out, and the heavy lifting is just about done. Ladbrokes faces some strong headwinds and the results didn’t look especially pretty, with pre-tax profits falling from £68m to £38m.
But there are reasons for thinking his successor could put a little sparkle back into the magic sign.Reuse content