RBS to unveil dramatic restructuring

Royal Bank of Scotland is this week set to unveil a dramatic restructuring in which assets worth several hundred billion pounds will be put up for sale.

Stephen Hester, RBS’s new chief executive, will trigger the dismantling of the empire assembled by his predecessor Fred Goodwin by creating a non-core subsidiary into which about £300bn (€334bn) of unwanted assets will be placed.

The aim is to isolate the troubled areas of the business into a “bad bank” and allow the stock market to place a value on the remaining core operations.

The plan is due to be unveiled on Thursday, at the same time as RBS announces Britain’s biggest corporate loss of up to £28bn (€31bn) and cost cuts worth around £1bn (€1.1bn) a year.

Mr Hester is not expected place a figure on the number of subsequent job losses, but reports this weekend said as many as 20,000 jobs could go, equivalent to around 10% of the global workforce and in addition to thousands of posts which have already been axed.

The Sunday Telegraph said the assets and businesses due to be placed in the non-core division will include Asian and Australian units acquired as part of RBS’s ABN Amro acquisition in 2007. RBS’s aircraft leasing unit and portfolios of mortgage and lending assets by its US business Charter One will also be set aside. And RBS will withdraw from about half of the 60 countries in which it operates, including Malaysia and some parts of eastern Europe.

The overhaul will leave RBS with businesses such as NatWest and Direct Line, plus parts of US retail banking subsidiary Citizens and key investment banking operations in places such as Hong Kong.

RBS, which is 68% owned by the taxpayer, is also likely to place at least £200bn (€223bn) of toxic assets into the Government’s asset-protection scheme, which aims to protect banks against further losses.

Talks involving Treasury officials and RBS and Lloyds Banking Group, which is also expected to participate, were said to be taking place this weekend.

The measures proposed by RBS in its restructuring have already been signed off by the UK Government, it was reported today. Mr Hester’s intention to ring-fence non-core parts of the business replicates his turnaround strategy at Abbey in 2002. He will stress that his plan for RBS will be delivered over five years and that the bank will not be rushed into selling assets at fire-sale prices.