RBS chief executive Stephen Hester quits with £1.6m-plus payoff
Hester, parachuted into the bailed bank during the 2008 crisis, will stand down at end of year as RBS prepares for privatisation. Read more…
Osborne urged to distribute RBS and Lloyds shares among voters
Government stake should be sold off using scheme in which those who apply pay for shares at later date, says thinktank. Read more…
RBS rejects joint proposal by US private equity firms JC Flowers and Apollo, but will contact other bidders in next few days
Royal Bank of Scotland has narrowed a shortlist of prospective bidders for hundreds of branches it must sell, with JC Flowers and Apollo dropping out of the race, sources familiar with the matter said.
The part-nationalised bank told the US private equity firms this week that their joint proposal had not been successful, the sources said. RBS is expected to contact other bidders in the next few days.
RBS has to sell 315 branches as a condition of receiving a £45.8m bailout during the 2008 financial crisis that left it 82% owned by the government. A planned £1.65bn sale to Santander collapsed last October.
A proposal from several of Britain’s biggest investment firms, fronted by former Tesco finance director Andrew Higginson, remains in the running, one of the sources said, along with a proposal from US private equity firms Centerbridge Partners and Corsair Capital. Virgin Money is waiting for a response to its proposal from RBS.
RBS may finalise a shortlist next week but the timetable for an eventual sale remains uncertain given the different types of proposals being considered.
RBS is preparing the business, code named Rainbow, for a stock market flotation but is open to the idea of having cornerstone investors on board before an initial public offering. The bank has said a sale this year is now unlikely, meaning it will have to ask European regulators to extend a December 2013 deadline.
UBS is advising RBS on the sale. RBS, UBS and JC Flowers declined to comment on the process.
Jon Pain, who worked at Financial Services Authority until 2011, takes new role overseeing regulatory affairs at bailed out bank
A former regulator is joining Royal Bank of Scotland in a newly created role overseeing regulatory affairs and conduct as part of the effort by the bailed out bank to clean up its reputation in the wake of the Libor rigging scandal.
Jon Pain, who was at the Financial Services Authority for four years until 2011, is joining the bank in August as head of conduct and regulatory affairs. He will become one of the most senior executives at the bank, joining the executive committee (just below board level) and potentially earning millions of pounds a year.
Stephen Hester, the RBS chief executive, said: “The creation of this position sends a clear message about how we want to do business – serving customers well, completing our return to a safe and conservative risk profile, and generating sustainable returns for shareholders.
“If we achieve these objectives, and do so in the right way, RBS will become a really good bank.” Hester is keen to oversee the privatisation of RBS, possibly next year.
Pain is joining from accountants KPMG where he was partner for financial services after leaving the FSA as a managing director of supervision in 2011. Before that he had worked for Lloyds from 1973 until 2008.
Pain is among a number of officials who left the FSA before it was carved up in April to become the Financial Conduct Authority overseeing most elements of City behaviour, allowing the new Prudential Regulation Authority to regulate the biggest banks.
His appointment comes in the wake of big banks are facing damage to their reputations from mis-selling scandals and penalties for bad behaviour, such as the £390m fine RBS received for rigging Libor.
Barclays recruited the former FSA boss Hector Sants into a top role overseeing regulation at the start of the year while HSBC has also made changes to its compliance and regulation divisions since it was fined a record £1.2bn for money laundering by US authorities.
Pain’s appointment is the latest in a string of management changes by Hester as a result of the decision to move finance director Bruce van Saun to run the US operation Citizens ahead of its partial stock market flotation next year. Van Saun is being replaced by head of risk Nathan Bostock.
In 2010 when Sants had quit the FSA – before changing his mind and then finally quitting last year – Pain had reportedly been expecting to have replace him, on an interim basis.
Four top bankers share bonus pot, but chief executive and finance director miss performance targets
Four top bankers at Royal Bank of Scotland have been handed £2.7m in shares from bonuses that were awarded to them by the bailed-out bank three years ago.
The largest award was handed to Ellen Alemany, the outgoing head of the US arm Citizens, who received just under £1m. Nathan Bostock, the current head of risk who is being promoted to finance director, received £670,000, while Chris Sullivan, business banking head, received £480,000.
Ron Teerlink, the head of the bank’s back office operations who is to leave later this year, received £650,000.
None of the bankers received the total number of shares they were first awarded in May 2010 as they hit performance targets that entitled them to only a third of the maximum.
Chief executive Stephen Hester and outgoing finance director Bruce van Saun missed out on bonuses under the scheme after failing to reach any of the performance targets attached to their share awards.
The bank only disclosed the number of shares of the four bankers received after they had sold shares to pay taxes but the Guardian made estimates of the total number of shares that they would have received before the share sales.
IMF calls on chancellor to devise a ‘clear strategy’ for bailed-out banks and pour more taxpayer funds into them if necessary
George Osborne is preparing to set out his plans to return bailed-out Lloyds Banking Group and Royal Bank of Scotland to the private sector after the International Monetary Fund called on him to devise a “clear strategy” for the two banks.
The Washington-based body, in London to present its annual health check on the UK economy, also told the chancellor that if the two banks needed more capital to bolster their financial strength he should pour in more taxpayer funds, as it would prove beneficial to the economy.
Some £65bn of taxpayer money is already locked up in shares in RBS and Lloyds, which both issued stock market announcements to insist they did not need to tap investors – particularly taxpayers – for fresh funds to plug capital shortfalls, estimated to be about £10bn.
The intervention of the IMF forced Osborne to give the clearest indication yet he will outline his strategy for the two banks next month, with speculation focusing on his Mansion house speech in June.
More generally, the IMF said banks should be required to raise equity, cut dividends and show restraint on remuneration rather than cut back on lending.
Osborne said he would reveal his decision on Lloyds and RBS after the crucial report by the Parliamentary Commission on Banking Standards, which is expected to report next month . The report may call for full nationalisation of RBS, already 81% state owned. Lloyds is 39% owned by the taxpayer.
“Having refocused their business, now is the time for a clear strategy on how to return RBS and Lloyds to the private sector in a way that protects value for the taxpayer,” Osborne said.
Shares in the two banks rose after they said their long-running discussions with the new City regulator, the Prudential Regulation Authority (PRA), over capital requirements ended. The banks said they could sell off businesses and cut down on risks rather than raise fresh funds to fill the shortfall.
Lloyds ended nearly 2p higher at 62.96p – above the 61p level the government now sees as break-even – and RBS ended 7.4p up at 349.6p.
The IMF presented a dilemma for Osborne by making clear that value to taxpayers should be central in any sell-off. Shares in both banks are firmly below levels the City regards as break-even: 73.6p for Lloyds and 502p for RBS, levels leaving taxpayers with £17bn of losses..
“Any strategy should seek to return the banks to private hands in a way that maximises the value for taxpayers, strengthens confidence and competition in the sector, and minimises outward spillovers,” the IMF said as it indicated a strategy should be outlined by the end of the year. “In this context, if a sovereign backstop is required to meet a capital shortfall, it should be provided, as this would have a high multiplier.”
The IMF did not indicate when stakes should be sold off and noted that “challenges remain” as the banks had failed to sell the branches which the European Union had demanded should be disposed of in return for £65bn of state aid.
The specific capital shortfalls of Lloyds and RBS were not disclosed but are thought to make up a large part of the £25bn hole identified by the the Bank of England’s financial policy committee in March.
The IMF said the new stress tests by the PRA planned for 2014, following this year’s exercise for the financial policy committee, should provide more detail about the methodology, results and bank-by-bank capital plans.
Lloyds, which analysts estimate has a £3bn shortfall, said it could plug its gap by generating profits and continuing to sell non-core assets, such as problem loans – ensuring taxpayers and other investors would not need to buy new shares or other types of financial instruments.
To underline the point, Lloyds raised £500m just after the stock market closed by selling another tranche of its stake in wealth manager St James’s Place. Since March, Lloyds’ stake in the firm has fallen from 57% to 21%.
RBS said it could fill its capital shortfall by selling off part of its US business, Citizens, and scaling back its investment bank.
The PRA said that further announcements would come from other banks once discussions over capital had been concluded. The City is most concerned about the outcome of discussion with Co-operative Bank.
Bailed out banks attempt to reassure City they will not need to tap investors – or taxpayers – for fresh capital
The government needs a “clear strategy” to privatise Lloyds Banking Group and Royal Bank of Scotland, the International Monetary Fund said on Wednesday, as the two bailed-out banks attempted to reassure the City that they would not need to tap investors – or the taxpayer – for fresh capital.
But the IMF told the government that if the banks did need more capital to bolster their financial strength it should plough more taxpayer funds into the banks on top of the £65bn already propping them up as it would prove beneficial to the economy.
The Washington-based fund also presented a dilemma for George Osborne as he mulled over the options for the two banks.
“Any strategy should seek to return the banks to private hands in a way that maximises the value for taxpayers, strengthens confidence and competition in the sector, and minimises outward spillovers. In this context, if a sovereign backstop is required to meet a capital shortfall, it should be provided, as this would have a high multiplier,” the IMF said as it indicated a strategy should be outlined by the end of the year.
Shares in the two banks rose as they said their discussions over capital with the City regulator, the Prudential Regulation Authority, had ended. Lloyds was up 2p at 62.88p – above the important 61p level the government now sees as break even – and RBS up 6p at 348p – still below breakeven points ranging from 407p to 502p for the taxpayer.
In response to the IMF, Osborne made his most explicit comment on the bailed out banks, saying that a strategy would be set out once the independent commission on banking publishes its report next month.
“Having refocused their business, now is the time for a clear strategy on how to return RBS and Lloyds to private to the private sector in a way that protects value for the taxpayer,” Osborne said.
The parliamentary commission may recommend fully nationalising RBS to break it up into good and banks while the chancellor is also facing calls from some Liberal Democrats to hand shares in the bailed out banks to taxpayers for free – which may be harder to prove is value for money – but is also considering options such as selling stakes to City investors with a Tell Sid-style privatisation for the public.
The IMF did not indicate when it thought the banks should be returned to the private sector and noted that “challenges remain” as the banks had failed to sell off the branches that the European Union had demanded should be disposed of in return for £65bn of state aid.
The intervention of the IMF came just hours after Lloyds, 39% taxpayer owned, and RBS, 81% taxpayer owned, attempted to end weeks of speculation about their capital positions by telling the stock market they would not need to tap investors to plug capital shortfalls.
While their specific shortfalls have not been published, the Bank of England’s Financial Policy Committee warned in March that the banking industry had a £25bn capital shortfall.
Lloyds, which analysts estimate has a £3bn shortfall, said it could plug its gap by generating profits and continuing to sell off non-core assets, such as problem loans – ensuring taxpayers or any other investors will not need to buy new shares or other types of financial instruments.
Lloyds’ share price has been trading just above 61p for the last few days – a price seen as significant because it has been set by the Treasury as the level at which it will consider paying out a bonus to the bank’s chief executive, António Horta-Osório, if a third of the stake is sold off above this price.
As he announced the end of the discussions with the PRA, he said: “We are pleased with the substantial progress being made in the delivery of our customer focused strategy. Our strong capital position enables the group to actively support growth and lending in the UK economy as well as delivering sustainable results for our shareholders.”
Stephen Hester, the chief executive of RBS, was similarly upbeat. “We are pleased with RBS’s progress and momentum. Our balance sheet has been transformed and our core business has plentiful surplus funding to support continued growth in lending,” Hester said.
The bank can fill its capital shortfall by selling off part of its US business, Citizens, and scaling back its investment bank.
The PRA said: “The two banks have advanced their plans to a position where disclosure is appropriate. Once discussions have concluded with all banks, more information will be provided along with confirmation that, where necessary, banks will take appropriate steps to ensure that they meet the FPC’s recommendation on capital.”
Fund says disposal of £65bn bank stakes should be priority as Lloyds shares reach level considered as break-even for taxpayer
Speculation about a government sell-off of Royal Bank of Scotland and Lloyds Banking Group was escalating on Tuesday night amid reports that the International Monetary Fund is urging the Treasury to accelerate its disposal of the £65bn stakes in the two bailed-out banks.
As part of its annual health check on the UK economy, the Washington-based fund is said to be telling the government that disposal of the share stakes should be a priority.
Hopes of a sell-off of the 39% stake in Lloyds and 81% stake in RBS have risen in recent days as their share prices have climbed. On Tuesday shares in Lloyds closed just above 61p, the level which the Treasury has signalled it now regards as break-even for the taxpayer, while RBS was at 342p, still below any break-even targets set by the government.
The City has been focusing on 61p as a potential price at which to sell off Lloyds since March, when the bonus for the bank’s chief executive, António Horta-Osório, was linked to selling off a third of the taxpayers’ stake above this price. It is lower than the targets the City had originally been expecting of 73p, and the chancellor is yet to make public pronouncements on his intentions to sell off stakes in any banks.
He has made clear that he does not want to plough in more taxpayer funds to fully nationalise RBS, to enable it to be split into a good and bad bank before being sold back into the private sector, as championed by some members of the parliamentary commission on banking standards.
The Treasury would not comment last night on the speculation about a possible IMF view on the stakes, which came amid expectations that more information would soon be provided about how major banks intend to plug the £25bn capital shortfall identified across the banking industry by the financial policy committee earlier this year.
A number of banks could soon provide information about how they intend to fill any discrepancies highlighted by the FPC. It was not immediately clear how many banks would be able to provide information or what their plans were to fill any shortfalls in announcements that could come as soon as on Wednesday .
City analysts are predicting shares in the bailed-out banks will be trading well below breakeven prices over the next year
Amid speculation that George Osborne is keen to kick off share sales in bailed-out Lloyds Banking Group and Royal Bank of Scotland, here’s something for the chancellor to mull over.
According to figures compiled by Bloomberg, the target prices City analysts have set – where they think the shares might be trading in the next 12 months – are 54p for Lloyds and 321p for RBS.
These forecasts may worry the chancellor, who has sent clear messages in recent months about the prices he regards as breakeven for the two stakes: 61p for the 39% stake in Lloyds and 407p for RBS.
Until March, neither of these prices had been closely watched. Instead 73.6p and 502p were the ones the City had believed would be used to gauge whether the sale was at a profit or a loss.
The lower prices are the ones at which the shares were trading when the taxpayer bought up stakes, rather than the actual prices paid. As Ian Gordon, banks analyst at Investec, explains, the government paid 500p for shares in RBS in December 2009 when the shares were trading at 292p.
At today’s prices there is some cause for the chancellor to cheer if he uses his new methodology. Lloyds is above 61p, albeit by a whisker, although RBS is still languishing at 345p.
Yet among all the options being thrown at the chancellor, it is far from clear what his strategy is. A variation of a plan first supported by the Liberal Democrats to hand shares to taxpaying Britons? Selling off a stake to a sovereign wealth fund? Placing shares on the market to big City institutions alongside a “tell Sid”-style tranche for private investors?
It does seem clear that he has ruled out the full nationalisation of RBS – even though this may be recommended by Andrew Tyrie’s commission on banking when it reports in the coming weeks.
The questions are clearly being considered. The obvious time to tell the City of the answers would be the annual Mansion House speech next month.
Royal Bank of Scotland cuts 1,400 jobs in its high street banking arm
Royal Bank of Scotland is axing 1,400 jobs in its high street banking arm in a move that unions described as “brutal and irresponsible”.
Less than 48 hours after the bailed-out bank’s chairman Sir Philip Hampton had indicated job cuts were on the cards, the 81%-owned taxpayer owned bank said it was restructuring its retail head offices in the UK, largely in London and Edinburgh. The 1,400 jobs will go over the next two years.
The swingeing cuts – the support functions being targeted employ 3,600 staff – are being masterminded by Ross McEwan, the new boss of the retail division.
Some 37,500 roles have already been lost at RBS under group chief executive Stephen Hester who was appointed after the £45bn taxpayer bailout in 2008, and Unite, Britain’s biggest union, said 700 of the latest cut backs had been outlined to affected staff.
“This is brutal and irresponsible behaviour from RBS which is almost entirely owned by the taxpayer,” said Unite national officer Dominic Hook said.
“It is high time that the banks took its social responsibilities seriously. Since the beginning of the year RBS, HSBC, Barclays and Lloyds have announced plans to slash around 6,900 jobs. The industry almost caused the economy to implode in 2008 and now it is contributing to a jobs crisis,” Hook said.
HSBC warned on Wednesday that another 14,000 jobs would be lost in its operations around the world while Lloyds will have cut 40,000 since its £20bn bailout by the time its latest restructuring is completed at the end of this year.
McEwan said RBS, which last June was paralysed by a computer meltdown which stopped customers accessing their accounts, was investing £700m in improving services.
“Regrettably, we can only do that by restructuring the way we work in head office so that every effort is concentrated on supporting our customers and the frontline staff that serve them. This is clearly difficult news for our staff and we will do everything we can to support them, including seeking redeployment opportunities wherever possible to ensure compulsory redundancies are a last resort.”
The union said the biggest impact would be on staff in the Gogarburn head office on the outskirts of Edinburgh with the rest of the cuts spread across the country. Two departments providing support to frontline staff are being cut by 80%, the union said.