THE NEW chief executive of Royal Bank of Scotland, which owns Ulster Bank and First Active in Ireland, is planning to review the bank's strategy "from first principles" as it adjusts to the prospect of becoming a Government-controlled bank.
Stephen Hester, who yesterday replaced Sir Fred Goodwin at the helm of the 281-year-old bank, signalled that RBS would shrink its business and that its operations in the UK would be at the core of the bank's future, suggesting a significant unwinding of the expansion that has characterised Goodwin's eight years as chief executive.
The bank expanded heavily into Ireland during Goodwin's tenure in charge of RBS, buying First Active in 2003 for €887 million.
Ulster Bank Group, Ireland's third-largest retail bank, has grown from annual profits of €407 million in 2003 to €750 million last year. It has almost 300 branches and more than 56 business centres North and South.
Mr Hester announced his strategic rethink as RBS revealed a state-sponsored £20 billion (€26 billion) cash injection that could leave the state owning almost 60 per cent of the bank.
It raises the prospect that, after more than a decade of expansion in the UK, the US, Europe and Asia, RBS is poised to shrink back to a retail and commercial bank in Britain. This poses questions about many of the bank's overseas businesses, including its operations in the US, and the investment banking and Asian operations acquired in last year's €71 billion break-up bid for ABN Amro.
Mr Hester yesterday said there would be "no sacred cows" in his review, but he stressed that RBS would continue to have a spread of operations around the world.
"I have every confidence that RBS will continue to be a very international bank, with very strong presences internationally."
Mr Hester's first priority is expected to be scaling back RBS's investment banking operations, which account for a large chunk of its business and caused many of its recent problems.
Andy Hornby, chief executive of HBOS, which owns Bank of Scotland (Ireland) and retail bank Halifax, also resigned yesterday after it emerged that Lloyds TSB and its proposed new partner HBOS receive up to £17 billion of emergency funding, while the price Lloyds is paying for its rival is also being lowered. The British government is taking a 43.5 per cent share of the merged Lloyds-HBOS bank. The chairmen of RBS and HBOS are also standing down following the bailout.
- (Financial Times service, Reuters)
