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RBS warns of job cuts despite its bailout
Nick Goodway, Evening Standard06.11.08
Royal Bank of Scotland today warned of worse to come as it revealed the final details of its £20 billion bailout by the Government.
New chief executive Stephen Hester, who replaces Sir Fred Goodwin in three weeks' time, will launch a major review which is certain to see costs cut, jobs lost and non-core businesses closed or sold.
But in the meantime the bank, which owns NatWest, said that the recession, continuing credit crunch fallout and its plans to cut risk on its balance sheet would all "adversely affect fourth-quarter and full-year results".
It said it could not make a profit forecast for the full year.
But RBS surprised the City by not announcing billions of pounds more in writedowns and losses.
Instead, it said that credit market writedowns in its third quarter came to just £206 million on top of the £5.9 billion hit in the first half.
It admitted this was after using new accounting rules which allow banks to reduce the impact of falling market prices for their toxic assets.
Under the old rules third-quarter profits would have been £1.2 billion lower. RBS also warned that its investment banking division, which includes the major parts of ABN Amro which it bought last year, will make a loss in the final quarter even before credit market writedowns.
It said it had lost £700 million in the third quarter and would lose around £1 billion from specific "events in market dislocation", which are likely to include the collapse of Lehman Brothers and Washington Mutual.
RBS said today that Mark Fisher, the director responsible for integrating ABN Amro, will leave the board when Hester arrives and quit the group next year. He was paid £2.36 million last year and is on a 12-month contract.
RBS is receiving the biggest slice of the Government's £37 billion recapitalisation fund.
The Treasury is buying £5 billion of preference shares and is underwriting a £15 billion ordinary share offer at 65.5p a share.
RBS had a rights issue only six months ago when it raised £12 billion by selling shares at 200p a share. If existing shareholders do not take up new shares, which is likely, the Government will end up with a 58% stake in the bank.
Hester said he wants to buy back the £5 billion of preference shares on which it is paying 12% interest to the Treasury.
Until then it cannot pay cash dividends on the ordinary shares.
Reader views (8)
The 31% APR was over 18 months John. All I can advise people is do not consider going to RBS for any type of loan. If you want a loan shark then thats different....
Oh and the VW garage was not much cop either.
- Dean, London
You should never pay wholly in cash for a car, Larry, even if you can afford it. If the car goes wrong and you have , say one year's finance, then the finance company is responsible to get it put right. If they do not you simply stop your payments until they do. It always works because the finance co. has the leverage over the car dealer that the individual does not.(Also one year's h.p. is usually at a competitive rate).
- John, London
Surely I am not alone scanning the news media to see which non-executive director of RBS will fall on his sword first. Or am I living in cloud cuckoo land like the RBS board have been doing for the past decade ?
As far as I can make out, not one director has put him/herself forward for an interview,appeared on Tv or apologised for creating the most unwholy banking mess seen in the past 100 years.How they can continue to remain on the board defies me.
- Jose Luis, London
In 1993/4 I suffered in similar circumstances at the hands of RBS with my then business and personal bank accounts; their financial mismanagement, banking errors and they then even ignored an insurance financial protection policy which they, RBS, had sold to me twelve years before. Oh yes, they have written to say "sorry" but have never compensated us for the financial losses we suffered, and still even today suffer, because of RBS. So beware and be warned about RBS as very obviously things have only got worse now.
- Bernard Lockett, Folkestone, Kent.
Hi Dean, As a Banker, I will offer you this advice. Next time, buy a car for 10k or less, cash. Financing a car is the worst deal you will ever make, with VW, RBS or anyone else.
- Larry, Amsterdam, NL
"a major review which is certain to see costs cut, jobs lost and non-core businesses closed or sold" Presumably this is to save the guys at the top their big fat salaries.
- Sos, Oxford
Last year when I hit difficulties, I asked RBS (customer since 1983) for a £1500 loan. They said 'yes' but only if I was prepared to pay an eye-watering £18.5% interest rate. I told them what they could do with their 'offer' and went to another lender (APR 7.6%)which is still out there and no where near as big as RBS. So RBS, just WHERE has all your money gone? Being trousered by your so-called 'executives'?. No doubt these 'executives' will be trousering bonuses for kicking out the polite-yet-put upon staff in their branches - assuming RBS has any branches left after this cull. Sorry, but to me, RBS stinks.
- Joannie, London, England
Recently purchased a car from VW. Put down 10k and got the rest on finance. When turned up to sign the documents RBS were so kind to offer me 31%APR as VW turned me down... (I presume was true as the VW dealers were a bunch of stealers).
Can I get charged 31% on my own money that has bailed them out? I pay around 22K tax a year and don't get anything much to write about in return. If this was banks attempts at lending money in this difficult period then then can stuff it up their greedy backsides...
- Dean, London
