RBS to cut 2,000 more jobs as shares tumble
Decision comes after surprise exit of chief executive Stephen Hester
Holly Williams is an arts and features writer for The Independent, The Independent Magazine and The Independent on Sunday.
A C Grayling
A. C. Grayling is an English philosopher and founder of independent undergraduate college, New College of the Humanities. He is the author of several books including The Refutation of Scepticism (1985), The Meaning of Things (2001) and The Good Book (2011).
Thursday 13 June 2013
Royal Bank of Scotland confirmed plans for the loss of 2,000 investment banking jobs today as its shares tumbled on the back of chief executive Stephen Hester's surprise exit.
Sources at the taxpayer-backed lender said the roles will be cut over the next two years under plans to further shrink its investment banking business.
Job losses will be spread globally across the markets division, although it is not clear how many staff will be affected in the UK.
The blow comes just a day after Mr Hester announced he would be leaving the bank by December - a decision that took markets by surprise, sending shares down 6% today.
Uncertainty about the future of the 81%-taxpayer-backed bank saw its price drop 19.5p to 306.2p, with analysts at Shore Capital downgrading the stock to a "sell" rating.
The investment banking jobs cull comes as RBS takes further action to trim costs in the unit, having already halved the number of staff in the division from 24,100 to 11,300 last year.
It has slashed investment banking costs from £5.8 billion to £2.9 billion, but wants to reduce this further to between £2 billion and £2.25 billion.
The bank's Asian operations are expected to take the brunt of the job losses as RBS refocuses on trading hubs in London, Stamford in America, Tokyo and Singapore.
In a memo sent to staff, Mr Hester claimed the bank "nearly died" in 2008, but said it was saved by the "efforts and strengths" of its workforce.
He thanked the group's 100,000 employees for their "commitment, support and teamwork".
On his planned departure, he said: "Nothing about this decision was easy, but I can see that as we head towards a potential privatisation, now provides a window for the company to put in place a chief executive that can give fresh energy to the challenge of leading RBS through the next phase."
He added: "RBS lost sight of why it was founded, and it nearly died as a result. We've got back to a place where we can once again focus on the customer above all else.
"If there is one positive legacy to take from our past mistakes it must be that we never, ever forget why we are here."
But the memo, entitled Thank you, comes as yet more workers are braced to lose their jobs.
In a presentation by RBS group finance director Bruce Van Saun, the group made clear the investment banking arm would be led from the UK.
It is thought Chancellor George Osborne has put pressure on RBS to increase the scale and pace of its investment banking restructure.
Speculation has been mounting over a growing rift between Mr Hester and the Treasury over strategy for the bank.
Mr Hester said yesterday that it had been the board's choice for him to make way for someone new to lead the bank through privatisation and that he had been prepared to carry on.
He said he was "co-operating amicably and will stick around as long as they need me" before going on holiday.
Mr Hester added: "I have been pretty clear that I suppose I feel torn about this - I feel a sense of loyalty to the company and I want to do what is right for the company. If that was tolead the company through privatisation, I wanted to do that."
His departure has increased suspicions the move could pave the way for a wider restructuring of RBS.
Gary Greenwood of Shore Capital said: "Overall, we think this announcement increases the uncertainty around the shares and potentially delays further any return of the bank to private ownership."
The Commission on Banking Standards is preparing to publish its final report that may reportedly call for RBS to be split into a good bank and bad bank.
Mr Greenwood said: "Such a scenario may require the bank to be fully nationalised before the good bank can be subsequently privatised, a scenario that may not be in the short-term interests of existing minority shareholders."
The fall in RBS shares pushes it further away from the break-even value of around 500p which would enable the Government to sell.
Mr Hester is to leave later this year and will receive 12 months' pay and benefits worth £1.6 million and the potential for a £4 million shares windfall from a long-term incentive scheme. He will receive no bonus for 2013.
Last night former City minister Lord Myners claimed that pressure from the Government on Mr Hester had made his position "close to impossible".
He told BBC2's Newsnight: "He's made it very clear he didn't really want to go now. He's going because the board has said he should go and I think they are doing the bidding of George Osborne.
"George Osborne has been increasingly at odds with Stephen Hester over the management of this bank."
However the Chancellor publicly paid tribute to the departing bank chief, saying he ought to be commended for "having brought RBS back from the brink" following its taxpayer bailout at the height of the financial crisis.
He said: "When Stephen Hester took on the job at RBS in 2008 it was a bust bank with a broken culture and posed a huge risk to financial stability. RBS today is safer, stronger and better able to support its customers."
He added that Mr Hester had "made an important contribution to Britain's recovery from the financial crisis".
RBS has launched a search for his successor.
Mr Hester will continue in his role until December unless a successor is in post before then.
The decision comes amid mounting speculation over Government plans for RBS, which is 81% owned by the state.
RBS claims it is well on the road to recovery, despite reporting losses of £5.2 billion for 2012, driven by a £390 million settlement for rate-fixing, £1.1 billion provision for mis-selling and IT glitches.
Sir Philip Hampton, chairman of RBS, praised Mr Hester's leadership of the bank and said he would be leaving it in a "vastly improved position that many would have thought impossible five years ago".
He added that the board had been thinking about succession for a while.
The process accelerated in recent weeks as it became apparent Government had a desire for RBS to be privatised towards the end of 2014, he said.
Mr Osborne confirmed he would "shortly" set out plans for RBS following the imminent publication of the banking commission report and said he would use his Mansion House speech next week to outline further reforms.
"Having brought RBS back from the brink, now is the time to move on from the rescue phase to focus on RBS being a UK bank that provides greater support to the British economy, helping businesses and job creation here, and which can return to the private sector in a way that ensures value for the taxpayer," he said.
Downing Street said the decision for Mr Hester to stand down was a matter for the RBS board.
The Prime Minister's official spokesman acknowledged that the Government was represented in discussions on the long-term future of the bank through UKFI, the body set up to manage its shareholdings in the bailed-out banks.
"This is a decision of the board of RBS," the spokesman said.
"Boards, as you would expect, discuss future strategic planning and succession planning with their shareholders. Through UKFI, the Government is a very major shareholder. UKFI was involved in the discussion in the way you would expect."
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