Bank boss faces volley of criticism
Hampton under fire from investors over legacy as RBS chairman
He was accused of leaving a legacy of payment protection insurance mis-selling and poor treatment of business owners.
He told investors at the banks annual general meeting that free banking for those in credit was partly to blame for the PPI scandal which was driven by high charges. Customers were being sold one cheap product and one highly profitable one, he said. This denied them the transparency they deserved.
On the penalties imposed on the bank, he said the board had not anticipated the almost £10 billion it has paid in regulatory fines, litigation charges and customer redress.
“The scale of the conduct issues faced by RBS has markedly reduced our ability to retain earnings, delaying our capital re-build and directly reducing shareholder value.”
Regarding the recent IT outage which hit 600,000 customer transactions, he apologised to customers and said it was not on the scale of the 2012 meltdown.
Before the meeting at the RBS headquarters at Gogarburn, Edinburgh, he told the media that he thought it would take “several years” for the government to sell its stake.
In his address he said the bank had made “great progress” since he joined the board in 2009. In that time the share price has risen from 9p, equivalent to 90p today under the share split. It currently trades at 357p.
“The good businesses that sit within RBS are beginning to realise their potential and deliver value to their customers,” he said.
Chief executive Ross McEwan said before the meeting that he saw ‘no issues’ with the government’s planned sale of shares and was adamant that the recent IT meltdown was a one-off.
Speaking to the media he said he knew nothing of reports that the bank would have to shoulder the cost of selling the Treasury’s 79% shareholding.
“We do not see it as an issue,” he said, adding that the bank remained on track to carve out a ‘challenger’ bank which will be branded Williams & Glyn and floated at the end of next year.
“I do not know where that [the W&G issue] is coming from. It is a difficult piece of work and we have 4,000 staff working on it,” he said. “We are on target for the second half of next year. We are making sure it [W&G] is viable.”
He refuted suggestions that the bank had an ongoing IT systems problem. Referring to last week’s meltdown which halted 600,000 customer transactions, he said: “It is not a recurring one. It is different to 2012 [for which the bank was fined]. It impacted on a number of customers and it is totally unacceptable. We are doing a review so it doesn’t happen again.”
Asked to confirm that the problem was a result of ageing infrastructure, he said: “Let’s do the investigation first. This is not age related. Our technology is very good.”
Mr McEwan told shareholders that by 2019 RBS will be a “UK-centred bank with a focused international capability with around 85% of our assets in retail and commercial banking, and the remainder in corporate and institutional banking.”
The cost-income ratio, a key measure of efficiency, will be below 50%, he said.
Howard Davies, who takes over as chairman on 1 September, attended the meeting and said he was “excited” by the prospect. He said: “There is a lot to do. The chancellor’s statement [on selling shares] takes us into a new phase.”
He said the public was beginning to understand the importance of the banks to the economy.
“It is crucial you deliver as efficiently as you possibly can. I think people do understand that,” he said. His appointment to the board has been delayed to allow him to complete his report on runway options for London’s airports which he said will be published “within weeks”. He said it was due to be published last week.
Branch closures a ‘difficult’ issue – some have a ‘limited future’
Sir Philip was asked by one shareholder about the bank abandoning its policy of retaining the last branch in town. He said: “This is a difficult issue for the banks. The commuter train from Reading to Paddington is our most popular ‘branch’. It is the way our customers are moving and we have to move with them.
“We will invest in and keep a substantial branch network. Some of our branches are full and dynamic and we are tarting them up, but some have a limited future.”
He said the pace of change meant it was no longer appropriate for the bank to “continue doing the wrong thing” by keeping uneconomic branches open.
Mr McEwan added that the bank had added 11,500 points of contact for customers to access their accounts. Some were in Post Offices and this strategy was helping to keep open branches of both businesses.
He added that there were now more mobile banks. Where some branches once served several villages, the mobile bank now visited each one, thereby improving the service to outlying areas.
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