RBS accused of bullying firms for £1bn in fees
Rivals claim Stephen Hester's bank is barging into rights issues using its strength in corporate lending
Sunday 26 July 2009
Square Mile bankers have accused Royal Bank of Scotland of hardball tactics in its efforts to scoop a lucrative share of more than £1bn worth of fees made by City banks during the recent wave of rights issues.
Rival bankers are crying foul over the way RBS has supposedly "muscled its way" into many of the biggest capital raisings of the year grabbing large chunks of underwriting fees on issues such as Land Securities, HSBC and GKN.
Usually, underwriting spoils are largely enjoyed by banks that act as corporate brokers to companies. But analysis of 31 rights issues made by London-listed firms this year where more than £35bn of capital was raised, shows that RBS managed to earn fat underwriting fees on 12 occasions despite not acting as corporate broker to any of the companies in question.
Rivals have accused RBS of using its relative strength in debt and corporate lending markets to force companies to allow it to take part in the money spinning underwriting process. "RBS is acting very aggressively in trying to get a piece of the action at the moment," said one disgruntled banker. "The pressure it is heaping on companies to which it has lent money is considerable."
A number of City institutions are considering sending letters of complaint to the regulator on the issue. Another bank said: "To me, and many others, it simply seems anti-competitive. It's unfair."
A spokesman for RBS declined to comment but sources close to the bank said it was acting fairly in its attempts to win business.
"In these market conditions, everyone wants to make sure that a rights issue is properly supported. It's been well publicised recently that corporates are looking beyond their own corporate brokers and traditional investment banks to get rights issues done in difficult market conditions. If these companies are restructuring debt and raising equity at the same time, then it makes sense."
Concerns about RBS using its state-backed power in the City comes weeks after the Stephen Hester-led bank submitted plans to the European Commission on how to scale back parts of its business – an effort to avoid the imposition of punitive measures from Brussels in the future. The European Competition Commissioner, Neelie Kroes, has warned that RBS and Lloyds Banking Group, which received billions in state aid, would likely have to sell off big chunks of their businesses in the coming years. The EU said last week that the pair has just five years to lose state aid or be wound down.
Competition concerns were waived by the Government when it bailed out the banks last year. The rescues have left the banks with significant positions of power in segments of the market. Earlier in the year, Mr Hester revealed plans to sell off "non core" assets worth £240bn including some of its Asian operations. He is grappling with a mammoth £2 trillion balance sheet left by his predecessor, the disgraced Sir Fred Goodwin.
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