Not 4,000 redundancies, not 5,000 redundancies, but 9,000 redundancies at RBS? Plus, £2k bonuses?

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Last week, someone wrote here that they wished they’d accepted an offer from RBS instead of Goldman Sachs. This week, it seems an offer from RBS wouldn’t be so great a thing after all.

The Telegraph says RBS is thinking of shutting half its Global Banking and Markets division. McKinsey &Co. have apparently been brought in to draw up restructuring plans. "The British government has simply lost patience. The Government was prepared to go along with keeping the investment bank going when markets were looking better,” says one ‘senior source,’ “But they’re not prepared to keep things going in their present form.”

This is understandable: the present form is not a good one. In the third quarter, GBM profits fell 81% year-on-year to £112m. The cost income ratio in the business rose to 93%. Stephen Hester has said he aspires to a 55% cost income ratio across all divisions.

The Telegraph’s story is the latest in a series of speculative pieces predicting GBM annihilation. The Sunday Times suggested in October that RBS was preparing to make 5,000 redundancies. In order to get the cost income ratio back down to 55%, we suggested it might like to make a 4,000 person-reduction instead. But if half the GBM business is being shuttered, does this mean 9,000 GBM staff will go?

Maybe not: there are other alternatives, such as reducing pay.

2011 bonuses will almost certainly be poor. RBS accrued no bonuses in the third quarter and David Cameron has insisted he will “rein in” the bank’s ‘lavish’ £500m bonus pool. Then, there are the fears that the next instalment of 2010 bonuses will be clawed back. And Nick Clegg popped up at the weekend, warning RBS and Lloyds not to award "irresponsible" bonuses this year, whilist pointing out that last year’s bonuses were restricted to £2k (although RBS has always got around this by paying a larger deferred sum a few months’ later).

RBS could also cut salaries. As we pointed out last week, it’s is said to be similar to Deutsche, BarCap and Goldman Sachs in having granted 2009's salary increases as a non-pensionable fixed term element of pay. As such, those increases could be removed.

RBS bankers could have lower bonuses and lower salaries in future.

Nevertheless, there are likely to be a lot of redundancies. Hoare Govett is in danger of being sold or closed (RBC Capital Markets might buy it). If third quarter results are anything to go by, anyone working in credit or mortgage markets needs to be preparing their cardboard box. So do quite a few people in equities – an area RBS had been building up.

But some businesses will be safe. Portfolio management and origination is doing well. FX trading and swaps will apparently be fine (all the more so if they come out on the right side of the Vickers ring fence, now to be imposed by 2015.)

Maybe prime broking will be fine too. Euromoney has a big article this week extolling RBS’s prime broking business, which is in ‘final stage discussions’ to acquire a dozen new clients this year.

Whoever stays and whoever goes, RBS’s big restructuring won’t happen until 2012. GMB employees have Christmas to think how to reposition themselves internally to ensure they’re still around by 2013.