RBS Plans To Prune 30,000 Jobs In Investment Banking

Royal Bank of Scotland RBSBy Chandres (Own work) [CC BY-SA 3.0], via Wikimedia Commons

The Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS) plans to shut down its riskier investment-banking businesses, according to a report published by Financial Times.

Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS) is set to announce a strategic review when it reports earnings on February 27.

RBS’ workforce to shrink by 30,000

According to the Financial Times report, Britain’s largest state-owned lender’s workforce of 120,000 will shrink by 30,000 in coming years, as businesses including its U.S. bank and some British branches are spun off and jobs are cut.  The 30,000 jobs cited by the FT included the 18,500 staff at RBS Citizens Financial Group Inc., its U.S. banking unit, which RBS plans an initial public offering for later this year.

The slashing of workforce would also include about 4,500 workers at Williams & Glyn, a group of 314 branches that Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS) is selling to satisfy regulators as a condition of its state bailout.

Investors’ optimism

As reported earlier, Investec analyst Ian Gordon attributes investors’ optimism to confidence that RBS CEO Ross McEwan will introduce aggressive new measures at the strategic update next week, and while Gordon shares this confidence he disagrees on the timeline.

Last month, Jefferies analysts headed by Joseph Dikerson reiterated their Buy rating on Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS) as the research firm believes that recent announcement on litigation and conduct charges are not thesis-changing. The analysts predicted on appreciation of value in the RBS’ core operations as well as extensive balance sheet optionality.

Staff strength could fall below 100,000

According to Harry Wilson of The Telegraph, the slashing of jobs at Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS) could be announced next Thursday as part of chief executive Ross McEwan’s turnaround plan for the lender, as he faces pressure from the City to set out how he will get the business back into the black amid an expected loss last year of close to £ 8 billion. The job losses and business closures will likely see RBS staff numbers, which stood at 161,000 at the time of its £ 46 billion bailout in 2008, fall to below 100,000 for the first time since the bank’s 2000 takeover of larger rival NatWest. Citing sources with knowledge of the work, Harry Wilson points out the ‘Project Cook’, the internal codename for the plans, would see RBS cut tens of thousands of staff.

Gary Greenwood, an analyst at Shore Capital, thinks exiting overseas businesses would enable Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS) to become much more focused on the U.K. retail, business and corporate banking segments, while also allowing for significant cost cuts and reinvestment in new technology.

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About the Author

Mani is a Senior Financial Consultant. He has worked in Senior Management role in large banking, financial and information technology organizations. He has provided solutions for major banking and securities firms across the globe in the area of retail, corporate and investment banking. He holds MBA (Finance) and Professional Management Accounting Qualifications. His hobbies are tracking global financial developments and watching sports

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