Sweeping changes for RBS
(2 March 2009 – UK) Along with its record loss, RBS has announced that there will be sweeping changes to the way it does business, including massive asset sales.
RBS has decided on a strategic review of its business, which is based on a restructuring plan aimed at restoring standalone strength. The bank plans to offload all non-core business, which could include the majority of its Asian operations.
Specifically, around 20 percent or £240 billion of funded assets will be moved to a non-core division for sale over the next three to five years.
For those businesses that aren’t sold off, substantial change is to be delivered, assuming each unit meets the five tests that will be put in place by RBS.
These tests of business quality are strategic tests: Top tier competitive position in enduring customer franchise; at least 15 percent ROE in normal markets; proportionate use of balance sheet, risk & funding; capable of organic growth, but ‘market limited’; and connected to the group – customers, products, people.
Generally, RBS will also centre on the UK with smaller, more focused global operations; radically restructure the global banking and markets division, taking out 45 percent of capital employed; cut more than £2.5 billion out of the bank’s cost base; have access to the Government Asset Protection Scheme; and drive major changes to management, processes and culture.
Stephen Hester, RBS group chief executive officer, said that the bank’s goal is to correct those factors that made it particularly vulnerable to the downturn and to further adjust the business to reflect changes in the environment facing our industry.
Hester said the bank also aims for AA category standalone credit status and to rebuild shareholder value, along the way enabling the UK Government to sell down its shareholding.
Specifically, around 20 percent or £240 billion of funded assets will be moved to a non-core division for sale over the next three to five years.
For those businesses that aren’t sold off, substantial change is to be delivered, assuming each unit meets the five tests that will be put in place by RBS.
These tests of business quality are strategic tests: Top tier competitive position in enduring customer franchise; at least 15 percent ROE in normal markets; proportionate use of balance sheet, risk & funding; capable of organic growth, but ‘market limited’; and connected to the group – customers, products, people.
Generally, RBS will also centre on the UK with smaller, more focused global operations; radically restructure the global banking and markets division, taking out 45 percent of capital employed; cut more than £2.5 billion out of the bank’s cost base; have access to the Government Asset Protection Scheme; and drive major changes to management, processes and culture.
Stephen Hester, RBS group chief executive officer, said that the bank’s goal is to correct those factors that made it particularly vulnerable to the downturn and to further adjust the business to reflect changes in the environment facing our industry.
Hester said the bank also aims for AA category standalone credit status and to rebuild shareholder value, along the way enabling the UK Government to sell down its shareholding.
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