Chairman roasted over pay
Davies forced to defend RBS over ‘obscene’ salaries
One shareholder accused the bank of continuing to pay “obscene” salaries, while another said the executives adopted a “cavalier attitude” to the taxpayer and urged Sir Howard to sack the chairman of the remuneration committee.
Sir Howard said the bank had taken firm action on pay, reducing bonuses by 90% since 2010. “We are trying to pay responsibly,” he told shareholders attending the meeting at Gogarburn. The remuneration report was backed by 99.56% of voting shareholders.
Ross McEwan, chief executive, said that the “heaviest restructuring” of the bank will be over by the end of the year, but said a further £800m of costs would be taken out, without stating how this would be achieved.
In an upbeat assessment of the loss-making bank’s outlook he said it was “delivering” in each area of its strategy.
“Capital is strong, costs are down, we are supporting more business than any other bank in the UK and we are challenging industry practice and developing products…that deepen the relationship we have with our customers. This is exactly what RBS should be doing,” he said.
“In 2017 we will move into phase three of our plan with strong market positions, a concerted focus on our great customer brands. This focus will be designed to drive our operating performance so we can target attractive, balanced and sustainable financial returns – a 12%-plus return on tangible equity.
“And the heaviest restructuring will be behind us by the end of 2016. That said, as Howard [Davies, chairman] made clear significant challenges still lie ahead. The day when I don’t have to give that qualification will be very welcome.”
He said the bank will take a further £800 million out of costs this year to reduce its cost-income ratio from 72% which he said was “simply too high”.
Sir Howard, addressing the annual general meeting for the first time since succeeding Sir Philip Hampton, also spoke of progress the bank is making.
He said: “The underlying performance over the year shows the strength – and further potential – of our core businesses, albeit issues like our conduct legacy and restructuring have taken their toll on our bottom line.”
He acknowledged that the annual operating profit of £4.4 billion was reduced to a full-year attributable loss of almost £2 billion. First quarter results, published last Friday, “underscored the strength of those core franchises, he said. “Future quarters will, I believe, continue to show not only their value but continued progress as we move towards our goals for 2020.”
Shareholder Peter De Vink urged the board to resolve the legal action with those pursuing the bank over the 2008 rights issue, and criticised the “sickening greed” of the lawyers who are being paid up to £1,000 an hour to challenge those who lost thousands of pounds
By the end of the restructuring process he said the bank will be focused on 13 countries. It has sold Citizens in America and sharply reduced the size of the investment bank.
He shared shareholders’ disappointment that the share price was 38% lower than at the time of last year’s AGM, but he noted that UK bank stocks are down by 30% and European bank stocks by 35%.
“That reflects the fact that current financial conditions are difficult for all banks. When official interest rates are so low net interest margin tends to contract,” he said.
Commenting on the government’s 73% shareholding, he said there had been two positive developments in terms of the sale last year of 630m shares and the £1.2bn repayment of the dividend access share.
Further returns were dependent on resolving outstanding issues, including litigation matters, the most significant being an investigation by the US regulators into the sale of mortgage-backed securities.
Shareholder Lynne McMillan, describing herself as an “ordinary” person on an “ordinary” salary, took issue with the bank for continuing to pay “obscene” salaries to “some of the people in this room.” Chairman Sir Howard Davies said her sentiments were shared by people on the board and the bank had been “managing” rewards. The bonus pool is down by 90% since 2010, he said, adding: “We are trying to pay responsibly.”
“We are keen to resolve these issues, but the timing is not under our control,” he said.
On the European referendum he said it generated “additional uncertainty”, but the bank was “not one of those financial institutions whose core business depends critically on unfettered access to the EU markets.”
Even so, he added: “If a vote to leave the EU leads to a slowdown in growth, as the Treasury, Bank of England and most other economic forecasters suggest, that would be an unwelcome headwind.”
One shareholder accused the executives of having a “cavalier attitude” towards the taxpayer, saying they were “glorified civil servants” and asking what other company paid a bonus when it made a loss. Sir Howard said progress was being made and more customers were coming to the bank for mortgages and current accounts.