RBS to axe 3,500 jobs
Latest jobs cuts in Royal Bank of Scotland investment banking arm mean 33,000 posts have gone under Stephen Hester's tenure
Royal Bank of Scotland has given up on global ambitions for its investment bank, announcing 3,500 City-style roles were for the axe as it focuses on profitable operations and adapts to regulatory changes.
The latest job cuts in the investment bank – on top of 2,000 in the second half of 2011 – were announced alongside 950 redundancies at Ulster Bank and take the job cull since Stephen Hester was parachuted in to run the bank after its October 2008 bailout to 34,000. Unite, the union recognised inside retail banking arm, calculated that 22,000 roles had gone in the UK. Separately, Barclays announced 422 IT jobs would go from its retail bank with some roles being offshored to Lithuania.
Under Hester 10,000 jobs will have been axed from the RBS investment bank – the global banking and markets (GBM) arm which expanded rapidly after the ill-timed ABN Amro takeover – although the scaled-back operation will still employ 13,400 by the end of the latest three-year restructuring.
The fresh job cuts, and the pledge to cut another £120bn off the bank's bulging balance sheet, propelled the shares 6% higher to 23p – which still represents a £24bn loss on the taxpayer's 83% stake. Hester has already cut £700bn from the £2.2 trillion balance sheet he inherited. The rise in the shares inflated a potential £4.3m share-based bonus for John Hourican, who will run the streamlined investment bank, by more than £600,000.
Unite branded any potential bonuses "a disgrace". Deputy prime minister Nick Clegg said "this is not the time to start paying people lavish bonuses".
Hester told staff he was "sorry" that details of the cuts had leaked. He added: "This is a part of business I hate; making decisions that adversely affect people. But I truly believe that the best result for the most people can only lie in us making RBS a business success, sustainable for the long-term."
Without the changes, profits in the wholesale business would be "at unacceptable levels", he added. But he stressed he had no regrets about his decision up until now to use GBM to generate £10bn of profits since 2009. These had been "essential to pay for the clean-up losses of RBS legacy". When Hester took the helm following the bailout – which eventually amounted to £45bn – the bank reported the biggest loss in British corporate history of £24bn.
Despite the cuts, the bailed out bank will continue to employ some big earners. While GBM is to be renamed markets and international banking, it will still be involved in some potentially lucrative businesses.
The "markets" part will focus on trading debt, currencies and money markets while GBM's corporate banking business will be merged with global transaction services to create the "international" arm.
The unprofitable cash equities, corporate broking, equity capital markets, and mergers and acquisitions businesses – part of which is Hoare Govett – will be sold or shut down.
In December George Osborne told parliament that RBS was embarking on "further significant reductions" in its investment banking arm when he pledged to implement the recommendations by the Independent Commission on Banking. Hester had already signalled further cuts were on the cards in the investment bank as he responded the downturn in activity caused by the eurozone crisis.
The bank was careful to indicate on Thursday that it was in the process of realigning its business to erect the "ringfence" around its high-street business that was recommended by the ICB, but provided no more detail.