RBS Considers Sale of Coutts Foreign Arm to Focus on U.K.Stephen Morris
Royal Bank of Scotland Group Plc is considering selling the international arm of its Coutts private bank as it shifts its focus to wealthy clients in the U.K.
Britain’s largest state-owned lender is also examining options including joint ventures or merging Coutts International, it said in a memo to employees today. An internal review of RBS high-net-worth operations recommended to “substantially increase” efforts to expand the U.K. business, which counts Queen Elizabeth II among its customers.
Chief Executive Officer Ross McEwan, 57, is cutting back investment-banking operations and focusing on domestic customers after the company received the biggest bank bailout in the world. RBS, which is 80 percent owned by the government, also plans to sell its Citizens U.S. consumer bank in an initial public offering this year.
Linda Harper, a spokeswoman for RBS in Edinburgh, confirmed the contents of the memo.
The international unit of Coutts, based in Zurich, accounts for 41 percent of customer assets and 35 percent of revenue, according to the memo. The unit may be put up for sale as narrowing margins and its small size make it “challenging” to meet RBS’s target of at least a 15 percent return on equity, a measure of profitability, in all businesses, the bank said.
Alison Rose, CEO of commercial and private banking, will lead a team overseeing the revamp, “to ensure we make quick and meaningful progress,” RBS said in the memo. The lender will keep its Coutts and Adam & Co. brands in Britain.
The wealth-management industry oversaw $20.3 trillion at the end of December, up from $18.5 trillion a year earlier, according to Scorpio Partnership. UBS AG was the world’s largest wealth manager, with $1.97 trillion, followed by Bank of America Corp. and Morgan Stanley. HSBC Holdings Plc was the biggest British wealth manager, according to the study.
Coutts International had assets under management of 32.6 billion Swiss francs ($36 billion) at the end of 2013, little changed from the previous year, according to the annual report. The unit posted a consolidated net loss in the year after a profit in 2012, partly on provisions for the U.K. tax agreement and the U.S. disclosure program with Switzerland.
The unit is among banks that chose to disclose the total number of U.S. accounts since 2008, their highest dollar value and the employees who managed them, under a U.S. Justice Department program aimed to crack down on offshore tax evasion.
Under the new strategy, clients with 100,000 pounds ($167,850) to 1 million pounds of assets invested with RBS will be placed in the personal and business-banking unit which includes NatWest, according to the memo. Customers with 1 million pounds to 75 million pounds will be served by Coutts as well as Adam & Co. within the commercial and private banking division.
RBS’s first-half profit almost doubled as it was able to sell assets in its bad bank at more favorable prices and said it will meet a cost-cutting target of 1 billion pounds in 2014. The bank purchased Coutts, which traces its roots to 1692, as part of its acquisition of National Westminster Bank in 2000.
RBS shares closed at 339.60 pence, down 1.7 percent in London. They have risen 0.4 percent this year, while the FTSE All-Share Banks Index decreased about 9 percent.