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Stephen Hester, chief executive of Royal Bank of Scotland, today attacked the shopping list of sell-offs ordered on it by the European Union, which will force it to sell 318 branches, its massive insurance divisions, commodities trading and credit-card processing.
“These disposals do not improve competition or make it any easier for us to return money to the taxpayer,” said Hester. “We need to return to profitability and financial strength and I don't believe some of these disposals will help that.”
RBS shares fell 1.6p to 37p, meaning the taxpayer is already nursing a loss of £5.4 billion. But Hester said today's agreement with the EU and the injection of up to another £33.5 billion of taxpayer capital and covering £282 billion of its worst loans under the Government Asset Protection Scheme “give us the tools to do the job”.
Hester said he has four years to sell off the businesses which “should ensure that we get good value for the taxpayer”.
He admitted the 6000 workers at the 318 branches of RBS in England and NatWest in Scotland face an uncertain future as the branches are put on the auction block. They are already included in the 3700 job losses announced yesterday.
But RBS has already received approaches for the network, which will have the rights to the mothballed Williams and Glyn's brand and will “work quickly to separate and then sell it”.
Insurance, which includes the Direct Line and Churchill brands, was put up for sale earlier this year with a £6 billion-plus price tag but withdrawn “not on principle but on price” according to Hester. He now favours a separate stock market spin-off for the business, which would make it the largest British share flotation of this century.
The other sales ordered by the EU include Global Merchant Services, which handles five billion card transactions a year and North America's fifth-largest energy trader, the joint venture RBS Sempra. Third-party buyers will be found for these.
Hester said the new terms for GAPS “has the same effect as the scheme announced in February but on materially better terms for both the Government and RBS”.
The scheme now covers £282 billion of toxic assets rather than £325 billion. RBS will pick up the first £60 billion of losses rather than £42.2 billion but can bail out at any time for a fee.
Unlike Lloyds it needs to use the asset protection scheme to pass the Financial Services Authority's stress test, which Hester said “assumes there's another great recession on the horizon. In fact on our base case we shouldn't even get close to the £60 billion of losses.”
But the Government is not only putting up £25.5 billion of new share capital in the form of B shares, which can convert into ordinary shares at 50p each, but also promising another £8 billion worth of B shares if RBS hits a crisis.
The taxpayers' stake in RBS will rise from 70% to 84.4%.
Reader views (8)
Get used to it, Today is the start of Europe Running the UK.
- Bill Francis-Williams, Beaumont Pied de Beouf
Re McKinsey - they recommend the SAME for all banks - consolidate, segment customers and consolidate some more - its not brain surgery but my god they get paid like footballers for it!
- Christian Ball, London, UK
If ever there was an example of double standards why are French and german banks not being downsized? As anyone in the industry will tell you France remains closed to all outside companies who want to do buisness - the double standard is breathtaking. If this is what it means to be a part of the EU then for whats left of british business we probably need to withdraw and withdraw quickly before the Franco/german project slays us utterly
- Christian Ball, London, UK
RBS may be a joke (Jim, London), but no more so than the EU and the Government. The SS United Kingdom is sinking fast: the EU don't care so long as France and Germany are OK, and RBS is too global to be relied upon, and Brown & Co. are clueless. We are in an ever increasing hole with no obvious escape route in the immediate future. The only things on the bleak horizon are our mounting debts and the cavalier printing of money we don't have through QE. Goodnight UK.
- James Elliott, Eastbourne UK
RBS are a joke.
A failed business which is continuing to bleed the taxpayer while arrogantly trading as they did before.
We will pay for this disgrace for many years - people are dying in Iraq and Afghanistan because the military cannot afford new equipment.
Why? - because we gave it to the bankers.
RBS and Lloyds have blood on their hands.
- Jim, London, UK
nice call John,
the way to run an multi billion pound enterprise, and maximise the return on that investment is to cut off your nose, to spite your face. brilliant!
in the real world, the most successful companies utilise the best advice they can. Unless you think McKinsey isn't a world class consultancy (and you'd be a minority of one) then that is exactly what they SHOULD do.
- Scotty, London
This particular fat cat should be whipping himself for what he has done to his business.It's so easy to blame others.
- Mike, london,uk
Has anyone taken the government and the current RBS board to task for their hiring of McKinsey Consultants at no doubt punitive additional expense, to tell them how to run the business ?
If Hester and Co are to trouser millions of pounds of taxpayers money in guaranteed bonuses, I do not believe I am alone in thinking that the very least they can do is run the business themselves without outside intereference?
- John, Twickenham
