GO FASTER, jump higher. David Cameron has said he wants Stephen Hester, Royal Bank of Scotland’s chief executive, to turn the group round and improve its fortunes more quickly.
Clearly – so the state can offload its 82 per cent stake in the bank, which is a lightning rod for public anger – sooner than later.
But there is a counsel of perfection about such exhortations. RBS and the government are where politics and commercial reality collide.
Looking at the bank, the government sees computer cock-ups inconveniencing millions of customers, Libor-fiddling and incendiary bonus rows. All highly legitimate irritations.
But it is also valid to acknowledge what Hester has achieved since the financial crash of 2008 saw debt- submerged RBS come within a few days of the automatic cash dispensers closing down and the implicit domino threat of social disorder.
A lot of RBS’s underlying business is now profitable, masked by the RBS board using the earnings to clean up the bad bits of the bank (relieving Peter to pay Paul, so to speak).
Fred Goodwin’s twin-pronged strategy of flag-planting strategic expansion and betting the farm (ABN Amro) has been replaced by a streamlining, typified by RBS: completing the long march back from China, quitting Hong Kong, Indonesia, Singapore and Taiwan; getting out of asset management and energy trading; spinning off Direct Line on to the stock market; and radically cutting the group’s investment bank.
By last November, four years after RBS recorded the biggest corporate loss in British history, Hester had reduced the bank’s identified non-core business (those deemed not worth the candle, in layman’s terms) by £193 billion. A week may be a long time in politics, but that’s a lot of hard yards to put in.
RBS’s loans are now virtually covered by its deposits, far safer than when it was in thrall to frozen wholesale financial markets.
The amount of capital backing the bank’s loan book is unrecognisably stronger from the previous RBS administration, which talked a good game but was in retrospect just profitably riding a debt-fuelled boom on a balance sheet bluff.
Despite the tangible advances, however, it is more than background static that the government is mulling a 1980s “Tel Sid”‑type popular privatisation of RBS with a swathe of the shares being eventually owned by the wider public.
The Prime Minister says that remains an “interesting” question for the future.
Might the possibility of a mass public share offering prove even more interesting as the 2015 general election approaches?
Go faster, Mr Hester.
FSA bares its teeth as it goes out with a bang
STILL bobbing about on the taxpayer-bank rapids… Lloyds boss Antonio Horta-Osorio has fought a good war on payment protection insurance (PPI) mis-selling.
At his behest, Lloyds had first‑ mover advantage on dealing with the problem and not taking it to the courts like its peers. And the bank had set aside a chunky-looking £5.3bn for customer compensation claims.
But the regulator’s £4.3 million fine on the lender yesterday for failing to pay compensation quickly enough (go faster, AH-O, see above) is a reputational setback.
The Financial Services Authority’s days are numbered, but it clearly wants no exit with just a whimper.