In one of the biggest job losses in Europe in 2011/12, RBS is set to announce over 10,000 job cuts for RBS bankers this week.
RBS is a storied company with very interesting history over the past 5 years. It was founded in 1767 by a Royal Charter. In 2005, the Queen and the Duke of Edinburgh opened the new HQ building of RBS in Edinburgh.
It must be noted that RBS is one of the largest banks in the WORLD with revenues of GBP 31.8 bn in 2009 and GBP 29.6bn in 2010.
The then Chairman, Sir Fred Goodwin was a very aggressive banker and set out to create his legacy during the boom times. He went on an acquisition spree to make RBS the biggest bank in perhaps the whole world!
They also took a 10% stake in Bank of China in 2005.
His crowning moment was in 2007 when RBS, along with Fortis (Belgium) and Santander (Spain) took over ABN AMRO Bank for a staggering USD 100bn, the largest banking takeover in the history of banking.
We all know how that ended...but just to recapture those memories.....
ABN AMRO Bank could not be digested by all 3 top banks since global crisis started unfolding....
Fortis went bankrupt and Belgian Govt had to bail them out.
Santander, went through trouble but due to its takeover being only in Latin America, was able to manage it somehow, due to Santander's market strengths in that region. But the Spanish downturn of 2011, submerged their stock from EUR 12 in 2009 to EUR 5.65 today (52.9% down).
Meanwhile, RBS kept going under.....gradually, purely due to its systemic importance to the UK banking system.
In 2008, UK Govt bailed them out and took over 58% stake in the bank.
In 2009, the UK Govt gave more money to bail the bank, and took the stake upto 68%.
Finally, in 2010, UK Govt gave them more money and stands currently with a 84% stake in RBS Bank.
The UK Govt is going silly trying to close the various risky and unprofitable businesses but the 2009/2010 slight recovery delayed the inevitable.
Now, RBS is firing bankers like never before, thanks to the 2011 European crisis, which continues to get worse, with EUR declining and loan losses rising, unemployment rising and inflation rising due to oil prices and other factors.
They only had a GBP 3.6bn loss in 2009 and GBP 1.1bn loss in 2010. 2011 results are still awaited. I am sure they are equally bad, hence the job cuts.
Since April 2008, when RBS issued a GBP 12bn rights issue, their stock has been decimated.
From a peak of GBP 6.0263 in March 2007, it trades at GBP 0.2078 today, a loss of 96.55%. Just last one year, from Jan 11 to Jan 12, it has lost 47%.
Only in the month of Oct 2008, when the UK Govt took the 58% stake in RBS and 2 other major banks and injected a total of GBP 37bn in 3 banks, the RBS stock price plumetted from GBP 1.86 to GBP 0.6750 in ONE MONTH.
Some of the major names in UK, owned by RBS today, due to its acquisition spree are as follows:
National Westminster Bank
Royal Bank of Scotland
Adam and Company
Child & Co
Drummonds Bank
Coutts & Co
Ulster Bank
RBS Coutts
RBS International
Under the RBS Insurance brand, RBS owns multiple brands and is the No. 1 motor insurer in the UK:
Churchill Insurance
Direct Line and Direct Line for Business
Devitt Insurance
Green Flag
NIG
Privilege
UKI Partnerships which underwrites the: Churchill, Direct Line, Tesco Bank,
Egg, Mint, Mini, BMW, Peugeot, Suzuki, Vauxhall, Lloyds TSB, MBNA, NatWest,
Pearl, Prudential, Royal Bank of Scotland and Ulster Bank insurance brands.
and
Tracker, the UK's number one supplier of vehicle tracking services.
While down in Dubai, the impact of UK banks in trouble seems like an endless string of departures from the business as well as the city of Dubai. UAE happens to be one of the major contributing countries to RBS balance sheet and profits, partly due to the ABN AMRO acquisition.
ABN AMRO left Dubai in 2008 due to its acquisition by RBS. ABN's Private Banking arm continues to operate in DIFC on a standalone basis which is now 100% owned by the Dutch Govt.
Then, RBS decided to leave Dubai, and was acquired by ADCB in 2010. However, RBS Coutts, the Private Banking arm continues separately and they keep on refocusing their businesses ever since they arrived in Dubai in 1999.
Finally, Lloyds Bank in Dubai is now up for sale with news out in the market today and probably ADCB will take them over too.
EFG International, a Swiss Private Bank also shut shop prior to Dec 31 and will finally depart within the next few months from Dubai.
Fortis Bank from Belgium also shut shop in Dubai in 2009 and were acquired by their staff as a Management Buy Out, MBO and renamed.
I would not like to add here about Lehman closing in Sept 2008 and being bought over by Nomura nor I would like to say here that Merrill Lynch was merged with Bank of America in 2008....But I said it, nonetheless!
Nor would I tell you that Clariden Leu was merged with Credit Suisse in 2011 or that Rabo Bank sold Sarasin Bank in Dec 2011! Or that ING went bankrupt and was purchased by OCBC as Bank of Singapore in 2009.
Unfortunately, this global financial crisis has affected European banks a lot (even more than the US banks) and they continue to withdraw from businesses worldwide. Except for Lehman and Merrill Lynch from USA, all others mentioned above are European banks.
In fact, banks from most countries outside of Europe continue to do well.
However, we are still not at a stage where I would recommend to buy stocks or bonds of ANY Financials worldwide at this point of time.
By Liam Vaughan and Howard Mustoe
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