Six months ago, there was no intimation that RBS would be eviscerating its investment bank. Last June, John Hourican, CEO of Global Banking and Markets, made a presentation at the Deutsche Bank Financial Services Conference. There, among other he things, he:
- said RBS was a flow engine with leadership in fixed income and an enhanced equity and advisory business
- pointed out that RBS already had a top three structured retail equities business
- claimed that RBS was investing in its electronic platforms
- boasted that RBS was present in 39 countries
- and said that RBS had made ‘clear product choices,’ as shown below:
Six months on, and the Financial Times reports this morning that RBS is now looking at making 10,000 redundancies in global banking and markets over the next few years. This is the latest in a series of gloomy prognostications relating to RBS's intended redundancies, in which the number of cuts has gone from 4,000 to 5,000 to 9,000, to today's total.
“Investment banking was never really understood by management,” says the FT's source: “Stephen [Hester] has grown very cynical about it over the years.”
This seems strange given that Hester himself spoke enthusiastically about GBM last March, saying RBS was aiming for, ‘strong customer driven wholesale banking,’ and that it wanted to improve its, ‘share of wallet.’
Suddenly, however, clichés are being cast aside in the rush to cut costs. The FT’s article today suggests that:
- 10,000 jobs will go in GBM
- Equities will be most affected: RBS wants to exit the cash equities business entirely, preferably through a sale, although this looks unlikely.
- RBS may also withdraw from equity derivatives and M&A (even though RBS has been building its M&A business and climbed six places to 13th in the UK M&A rankings last year.)
- The structured credit and rates businesses will be ‘shrunk.’
- Many Continental European businesses will be abandoned. The FT says RBS will pull out of Spain, Italy, Russia, the Nordic region and the Middle East to leave an operation focused on London, Paris and Frankfurt.
- RBS Greenwich Capital may be sold.
- In future, the UK will account for 75% of RBS’s balance sheet
- What remains of the investment bank will be merged into RBS corporate and “global transaction services” business, which busies itself with cash management, custody and trade finance.
If you work at RBS, especially in equities, your options are limited. As we noted before Christmas, there’s already a surfeit of jobless equities staff and no one is really hiring.
Even if you don’t work at RBS, today’s news has big implications. To wit:
- Never trust senior management.
- If you work for a non-top tier European bank outside its home market, take defensive action. 2012 will be the a year of retrench to home territories.
- If you work for a business that has been subject to heavy investment since 2008, but which – despite strong top line growth – has neither broken even or distinguished itself with a reasonable league table position, prepare for the worst.
- If you’re thinking of trying to secure a new job in 2012, do so as soon as possible - before 10,000 redundant RBS bankers start hitting the market.