Calls for Royal Bank of Scotland to reveal plans for investment banking operation

ROYAL Bank of Scotland chief executive Stephen Hester is under pressure to issue a statement on his plans for its investment banking operations that could mean up to 5,000 job losses.

Hester was expected to publish a strategic review ahead of the bank’s annual results next month but is facing increasing demands to clarify his plans after being forced to deny that the bank intends to fire 10,000 staff in a shake-up of its markets business.

He has been working on options for the division for some months and the pace has quickened since the UK government announced in early December that it would adopt the recommendations of the Independent Commission on Banking for a partial separation of retail and investment banking operations.

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It emerged before Christmas that RBS was looking to offload its Hoare Govett corporate broking business inherited in the acquisition of the Dutch bank ABN Amro in 2007.

Trade union Unite yesterday reacted with anger to the latest speculation over job cuts and wrote to the bank seeking information, saying it was “vital” that a strategy should be worked out to save jobs at all levels.

National officer David Fleming said: “This constant speculation and rumour is highly concerning for those who work for RBS.

“Unite is today writing to management to call on them to engage with the union on their plans in the UK.”

RBS said speculation that 10,000 jobs would be lost was inaccurate. It is thought 5,000 is more likely and most of them would be in London, Hong Kong, Australia and the United States, including Stanford, Connecticut. There will be few direct job losses in Scotland, although there could be some knock-on affects as a result of changes in RBS’s mix of business.

Banking sources say the bank is likely to pull out of cash equities, equity derivatives and mergers and acquisitions advisory activities.

Its structured credit and interest rates businesses may also shrink and it could also withdraw from European investment banking.

Lazard has been appointed to find buyers for these businesses with a deadline of the end of this month although analysts believe it will be difficult to drum up interest in a sellers’ market. Among those named as potential buyers are Royal Bank of Canada, Nomura and Canaccord.

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It is the latest in a line of disposals either in process or due to emerge in the coming months.

China Development Bank, Japan’s Sumitomo Mitsui Financial Group and US bank Wells Fargo are slugging it out in the final days of an auction to buy RBS’s aircraft leasing business in a deal that could fetch up to £4 billion. A decision on the winner is expected by early next week.

The bank is also preparing this year to float its insurance businesses – Direct Line, Churchill and Green Flag – after failing to find a buyer.

RBS Aviation is one of the world’s top five commercial airline leasing firms. It owns, manages or has orders for 466 aircraft.

The RBS Aviation sale comes as US insurer AIG prepares to float its much larger ILFC leasing unit, though plans for that initial public offering have been postponed.

Aircraft leasing is seen as attractive as it offers steady demand and steady cash flows.

In a 452-page report released last month, the Financial Services Authority criticised RBS for its purchase of ABN Amro, the deal credited with triggering the Scottish bank’s near collapse.