RBS to Reduce 1,400 Jobs in U.K. Consumer Unit Overhaul
Stock Chart for Royal Bank of Scotland Group PLC (RBS)
Royal Bank of Scotland Group Plc, the recipient of the world’s biggest banking bailout, will cut 1,400 head-office jobs in the next two years as part of an overhaul of its consumer unit in the U.K.
RBS will spend 700 million pounds ($1.07 billion) updating its branches and improving its complaints-handling and mortgage processing, the Edinburgh-based company said in a statement today.
Chief Executive Officer Stephen Hester, 52, is struggling to turn around the 81 percent government-owned bank and begin the process of returning it to private ownership before the next general election in 2015. RBS, which has announced 37,000 job cuts since its 45.5 billion-pound bailout in 2008 and 2009, employed about 123,000 people at the end of March, according to data compiled by Bloomberg.
“This is clearly difficult news for our staff and we will do everything we can to support them, including seeking redeployment opportunities wherever possible to ensure compulsory redundancies are a last resort,” Ross McEwan, chief executive officer of U.K. consumer banking, said in the statement.
RBS will complete most of its restructuring next year, allowing the government to start reducing its stake by the end of 2014, Chairman Philip Hampton said on May 14. Hester said earlier this month that he sees a “cogent” case for the government to start selling its stake, even at an initial loss. The average price the taxpayer would achieve for its entire holding in RBS would be more than the government’s rescue price, he said.
Hampton said on May 14 more job cuts and branch closures are likely before the bank’s restructuring is complete.
“It is high time that the banks took social responsibilities seriously,” Unite labor union National Officer Dominic Hook said in an e-mailed statement. “The industry almost caused the economy to implode in 2008 and now it is contributing to a jobs crisis.”
U.K. retail banking contributed 4.97 billion pounds, or about 23 percent of RBS’s net revenue, in 2012, according to data compiled by Bloomberg.
The division’s return on equity, a profitability measure, is 11.5 percent, analysts at Credit Suisse Group AG led by Carla Antunes-Silva wrote in a note to clients today. That compares with 13.2 percent for competitor Lloyds Banking Group Plc’s U.K. consumer business, 14.3 percent for HSBC Holdings Plc and 13.3 percent at Barclays Plc, Credit Suisse wrote.
Those estimates includes reductions in profitability caused by the U.K. bank levy, payments to clients mis-sold loans insurance and hedging products and restructuring charges, which banks tend to exclude from their own calculations.
“With attention focused on plans for privatization and government intervention, we continue to think that there is a need for further restructuring at RBS,” the analysts wrote. “In its current shape and with the current strategy in place we continue to see RBS as the weakest player amongst U.K. banks.”
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