More jobs to go in restructuring

RBS boss insists bank ‘making progress’ despite 7th year of loss

Ross McEwan

Royal Bank of Scotland boss Ross McEwan today insisted it was making progress and needed to continue paying bonuses in spite of another loss and further costs for mis-selling.

He admitted there would be further job losses but was unable to provide a number.

The bank made a £3.5 billion operating profit that was turned into a £3.5bn bottom line loss mainly after writing down the value of its business in the US.

The total bonus pool is down 16% from £576 million to £483m and the number of bankers paid more than £1m a year will be revealed next year. McEwan said the bank needed a competitive pay structure to ensure it had the right people to rebuild the bank, but admitted in a BBC interview that the public was “quite right” to regard the sums paid in bonuses to be “outrageous”. He said it was not something he could, or was able to change at the moment.

He  said  it was making “good underlying progress in our core business”. The balance sheet was substantially stronger and on track to achieve its targets.

“Our 2014 performance shows a strategy that is working. The strong execution against the targets we set now gives us a platform to go further and faster against this strategy.

 “These results make clear that underneath the conduct, litigation and restructuring charges, we have strong performing customer businesses that are geared towards delivering sustainable returns for investors.

“What you see today is a bank that is on track and delivering on its plan; a bank that is able to deliver on its ambition to be number one for customer service and advocacy in the UK and RoI.”

On the restructuring he said: “It is taking far too long to root out past problems, far longer than anyone expected.”

Operating profit came in at £3.5bn compared to a loss of £7.5bn in 2013. After taking account of one-off items including £4bn written off the value of Citizens Bank, £2.2bn set aside for litigation charges and £1.3bn restructuring costs there was an attributable loss of £3.5bn against  a loss of £9bn for 2013.

The bank will pull out of 25 territories, leaving it in just 13 countries. It announced the sale of another business in the US to raise further capital.

It has also been confirmed that Sir Howard Davies will take over as chairman from Philip Hampton on 1 September 2015. Rory Cullinan has been appointed Executive Chairman for CIB and Capital Resolution, Donald Workman will take over as Executive Chairman for Coutts and Rory Tapner is leaving the bank.

Mr McEwan will  forfeit a £1 million allowance in a further indication that public pressure over excess salaries and bonuses may be impacting on attitudes at the banks.

Mr McEwan’s decision on his allowance is also likely to turn the spotlight on his rivals who are in line to receive big bonuses as a result of sharply improved performances. Lloyds Banking Group’s Antonio Horta Osorio is due a a £7 million bonus.

Lloyds will defend its chief executive by confirming that his reward will be made up largely in shares linked to performance.

However, Mr Horta Osorio has been urged not to accept the bonus until after the Government has sold its entire stake.

The government has been selling shares in Lloyds as it makes a steady return to the private sector,  a process that could not have been undertaken without the bank being restored to profit.

Mr Horta-Osorio’s supporters will say that his remuneration compared favourably with the £8 billion returned to the Treasury so far in selling down its stake to 23.9%.

HSBC executives face grilling

HSBC chairman Douglas Flint admitted to MPs that the tax avoidance scandal surrounding its private Swiss bank had caused “horrible reputational damage”.

Mr Flint, however, responded to a question about whether he should sack his chief executive Stuart Gulliver by saying he was doing a good job. Mr Gulliver was not chief executive at the time of the alleged incidents.

Both men faced questions from the Treasury Select Committee and conceded that the affair had been a serious setback for the bank.

“It clearly was unacceptable, we very much regret this and it has damaged HSBC’s reputation,” Mr Gulliver told the committee. “I am responsible for clearing it up. I have made substantial changes,” he said.

He denied any wrongdoing and said that he had paid all his UK taxes and opened his Swiss account via a Panama company so colleagues could not see his finances.

Mr Flint and Mr Gulliver said they would not resign over the affair. When one MP read out a number of fines and investigations involving the bank, Mr Flint said: “It is a terrible list.”

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