Royal Bank of Scotland plans to shed as many as 2,000 employees from its investment banking arm as it completes the integration of ABN Amro, the disastrous Dutch acquisition that pushed RBS to the brink of collapse.
John Hourican, the head of RBS’s global banking and markets division, told the Financial Times that a smaller, more focused business would deliver more stable profits, while avoiding the “strategic tourism” that saw past management teams pursue ill-fated expansion.
“The thing about the ABN Amro deal was it was a massive, bold undertaking at exactly the wrong moment,” Mr Hourican said. “You could not have chosen the more perfect ill-timing for any transaction.”
RBS, like other banking groups with sizeable investment banks, is reshaping its business in response to sluggish markets and tighter regulation across the sector. HSBC, Credit Suisse, UBS and Goldman Sachs have all announced sweeping cost-cutting programmes in recent weeks, shedding thousands of jobs in Europe and the US.
At RBS, the 2,000 jobs earmarked for elimination within global banking and markets are part of the “Change the Bank” initiative, which was set up to reduce inefficiencies across the group.
Under Mr Hourican, RBS has already scaled back the scope of its investment banking business. The bank reduced its client base to 5,000 – from 26,000 before the financial crisis – and got out of 12 countries.
The tie-up with ABN in October 2007 is widely blamed as the catalyst for the bank’s implosion at the height of the financial crisis. An RBS-led consortium with Spain’s Santander and Fortis, the Belgian-Dutch lender, paid €71bn for ABN just days before global markets started to stutter. RBS was forced into a government bailout a year later, and the UK taxpayer still holds an 83 per cent stake in the bank.
“It was the largest cross-border hostile of a bank ever undertaken, with the added complication of a consortium, combined with the fact that the market went south within days of the deal being consummated,” Mr Hourican said. “It never had a chance of succeeding financially.”
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