Bill Jamieson: Talk of RBS break-up continues as woes mount

EVEN at the height of the banking crisis few imagined that, eight years later, Royal Bank of Scotland would still be deeply mired in losses, and its shares languishing way below the price the government paid for its 84 per cent stake.

Bad news keeps on dripping  and the brand seems irredeemably tarnished. Picture: Getty

Little wonder searching questions are being asked as to whether RBS may return to a “normal” life in anything like its present form. Taxpayers could be better served by a break-up of the bank and a sale of the constituent parts.

The latest figures are numbing. Last week it reported 2015 losses of £1.98 billion – with more to come. On top of a £3.6bn charge to cover conduct and litigation costs here and in the US it has set aside a further £2.9bn for the costs of re-structuring and withdrawal from 25 of the 38 countries in which it still operates.

Its woes seem never-ending. Among the conduct and litigation issues, RBS has put aside £600 million to pay claims for the mis-selling of payment protection insurance in the UK. And all this comes after cutting costs by £983m last year.

I don’t doubt the strategy of chief executive Ross McEwan or that his drive to radically slim down the bank and concentrate on a simple, rock solid service to domestic and business customers is the right one.

But legacy problems have been massive. And these have been compounded by costs and fines for PPI mis-selling – a catastrophe that unfolded after the financial crisis had passed, when customers and shareholders were being assured the bank was on the mend. McEwan has worked to change the culture within the bank. But that has proved a far longer haul than anyone expected.

Last week brought a disconcerting report from the Chartered Institute for Securities and Investment (CISI) that bankers were pessimistic about the pace of culture change in their industry. Its online survey asked “How long do you think it will take (from now) until the public really believe that banks have changed their culture?” It showed that 50 per cent said that it would take more than ten years. In 2013, when asked the same question, feedback indicated that 39 per cent thought it would take more than ten years. The survey attracted 694 respondents, with 29 per cent indicating they thought it would be “between six and ten years” before a change in culture would be acknowledged.

The Financial Conduct Authority announced in December it would be shelving its review of banking culture and that the Banking Standards Board (BSB), would be better placed to carry out such a review.

Some sort of progress report would be helpful. Simon Culhane, chartered FCSI and chief executive of the CISI, says that training “should be not seen as a sign of inherent weakness but as a demonstration that a bank understands and accepts its responsibilities. Being more open about the actions that they are taking would, we believe, be seen as a positive step.”

Meanwhile, what of those share sale ambitions? RBS shares fell 7 per cent last week to 226.6p. A 5.4 per cent stake was sold last August at 330p a share, worth £2.1bn. But a further sale at today’s price would translate into a whopping loss of about £25 billion on what the taxpayer paid.

It’s not just that the bank’s numbers have to come right and legacy issues be dealt with once and for all. There also needs to be a clear public perception that the bank’s culture has changed for trust to be restored.

But the bad news keeps on dripping – and the brand seems irredeemably tarnished. Little wonder that there is talk that a break-up sale would be the better solution.

Lower pound not all bad news

Last week the pound fell 2.8 per cent at one point to $1.3857 – its lowest point since March 2009. The blame was pinned on Boris Johnson for throwing his weight behind the campaign for Britain to leave the EU.

But two points have been overlooked. Is the pound’s fall all really about Brexit? Currency traders keep a close eye on bookies’ odds as a guide to the vote outcome. And at present the bookies are giving Remain a 69 per cent probability against Leave’s 31 per cent.

Just as relevant a factor here surely is that in recent days the dollar has been strong against most currencies. So, in considering the pound’s drop, the dollar’s strength should also be factored in. Note also that there has been nothing like as strong a sterling sell-off against the euro. It closed on Friday at €1.273 – above last week’s lows.

And is a lower pound such bad news? For many struggling UK exporters, they will view it as just the fillip they need.