By Simon Miller
Over 3,000 jobs are to go at RBS as it restructures its wholesale banking operations, the state-owned back announced this morning (12.01.2012).
Its global banking and markets division (GBM) has already announced 2,000 job losses but the latest move will see 3,500 go over the next three years in its UK and overseas operations.
RBS plans to exit cash equities, corporate broking, equity capital markets, and mergers and acquisitions businesses while concentrating on fixed income, foreign exchange, debt financing, transactions services and risk management solutions.
GBM's corporate banking business will combine with the international businesses of our Global Transaction Services arm into a new "International Banking" unit and provide clients with 'one-stop shop' access to our debt financing, risk management and payments services.
This international corporate business will be self-funded through its stable corporate deposit base.
The domestic small and mid-size corporates currently served within its Global Transaction Services will be managed within RBS's domestic corporate banking businesses in the UK, Ireland (Ulster Bank) and the US (Citizens).
RBS said its objective post-transition was for both its domestic and international corporate banking businesses to be wholly funded through corresponding deposits (i.e. c100% loan-to-deposit ratio).
Group chief executive Stephen Hester said the recovery plan had already reduced its balance sheet by some £600bn and have rebuilt it capital ratios with the investment bank producing an average return on equity of 19% with over £10bn in profits since 2009.
He added: "For our strategy to be effective, it must adjust to fresh challenges. And it is clear that, particularly in the wholesale banking arena, significant new pressures have emerged. The changes we are announcing today seek to ensure that RBS is at the front of the pack in pursuing a strategy that reflects the environment we expect to operate in.”
The former GBM funded balance sheet is targeted to reduce by around £120bn from £420bn as at 30 June 2011 to £300bn over the up-to-three year implementation period. Associated usage of unsecured wholesale funding is targeted to decrease by approximately £75bn during the same period. Risk weighted assets and equivalents, post Basel III changes and at the end of the implementation period are expected to be less than £150bn versus the £225bn previously indicated, of which the markets business will aim for £100bn.