Investors voice fears over RBS split

Sir Philip Hampton has said RBS will take legal advice on the issue of whether the government can vote. Picture: Getty
Sir Philip Hampton has said RBS will take legal advice on the issue of whether the government can vote. Picture: Getty
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INDEPENDENT shareholders are understood to have signalled to Royal Bank of Scotland chairman Sir Philip Hampton their strong opposition to any break-up of the taxpayer‑backed bank.

The groundswell of opposition comes as Hampton suggested at RBS’s interim results on Friday that only independent minority shareholders would be able to vote on any plan to split off the bank’s poorly-performing loans into a separate entity.

He said RBS would take legal advice on the issue, but his understanding was the UK government would not be able to use its 81 per cent holding to vote.

A “good bank-bad bank” demerger is being studied by the Treasury at Chancellor George Osborne’s instigation following a call for such an investigation by the Parliamentary Commission on Banking Standards.

Advice is being provided by investment bank Rothschilds, fund manager BlackRock and law firm Slaughter & May, with a report due in September.

“I don’t know any shareholder who is keen on it [a split]”, one leading shareholder was reported saying at the weekend.

“The general view is it will be kicked into touch by the Roths­child report.”

He said that the other option of a vote on the plan would be undesirable.

The controversy about a break-up is seen as the first big item in the in-tray of RBS’s new chief executive, Ross McEwan, who formally takes over from Stephen Hester in October.

Elsewhere, the recent surge in the share price of Lloyds Banking Group is seen as likely to trigger both an earlier move to re-privatisation and a bigger-than-expected payout for chief executive Antonio Horta-Osorio.

It has emerged that if the UK government sells down a third of its 39 per cent holding at the latest share price of almost 75p, then Horta-Osorio would qualify for 300 million shares worth a total of £2.22 million.

Five months ago, when the share price was under 50p, Lloyds said that its chief executive would get shares worth just under £1.5m in the event of a one-third sale.

However, the shares have ­rebounded, with a further fillip late last week when the bank posted a strong return to interim profitabity from losses last time.

Under the incentive arrangements, Horta-Osorio would not be able to cash in the shares ­before 2018.

• The recruitment agency Orion Group has agreed a £62m funding package with RBS as it looks to expand into Asia Pacific and South America.

The deal includes a £58m asset-based lending facility. Orion chairman Alan Savage said the company was “thrilled” to get the financing package offered.

Lorna Bell, corporate development director at RBS Invoice Finance, said Orion was “well known and highly regarded in the Scottish marketplace”, adding that she was delighted to “welcome on board a very high-profile customer to the bank”.