RBS to Reduce Global Footprint -- Update

By Margot Patrick 

LONDON-- Royal Bank of Scotland Group PLC on Thursday said it would exit around 10 countries this year and pull back sharply from investment banking as its 2014 net loss narrowed and it edged closer to shedding state support.

The 80% government-owned bank posted a GBP3.47 billion ($5.39 billion) net loss, narrower than 2013's GBP9 billion net loss. Operating profit was GBP3.5 billion, against a GBP7.5 billion operating loss in 2013.

Chief Executive Ross McEwan said the net loss was the result of a series of one-off charges, including a GBP4 billion write-down on the value of part-owned U.S. unit Citizens Financial Group and GBP2.2 billion in conduct and litigation charges. He said the bank is paying the price for its past ambitions to be a global investment bank, and now needs to take more radical measures to make RBS a sound investment for shareholders.

Mr. McEwan said the bank will "substantially reduce" its presence in Asia and the U.S., and fully exit its markets businesses in Central and Eastern Europe, the Middle East and Africa. He declined to say how many jobs will go in the bank's U.S. operation, which includes a vast trading floor in Stamford, Conn., but said "it will be a much smaller operation there."

"This is a plan for a smaller, more focused, but ultimately more valuable bank with the vast majority of its assets in the U.K., and for RBS marks the end of the stand-alone global investment bank model," Mr. McEwan said.

Since requiring a series of government bailouts to survive 2008's financial crisis, RBS has drastically cut its size and ambitions. It halved the number of countries it operates in, to around 25, and aims to bring that total down to 15 or less. Last year, it sold a 29% stake in Citizens in an initial public offering and plans to fully exit the bank by the end of 2016.

The bank on Thursday announced its latest disposal, of a $36.5 billion loan portfolio to Mizuho Financial Group.

RBS shares were trading at 410 pence early Thursday, up around 1.7% on the day but still well below the roughly 455 pence price needed for the government to break even on its investment.

The bank on Thursday named Howard Davies as its new chairman from Sept. 1, replacing Philip Hampton.

Write to Margot Patrick at [e-mail]

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