ROYAL Bank of Scotland is on the hunt for a buyer of its Australian corporate and institutional banking (CIB) operations, as CEO Ross McEwan seeks to simplify the government-backed lender after seven straight years of annual losses.
Following RBS’s £3.5 billion ($6.94bn) loss announced late last week, a spokesman confirmed that a global restructure to create a “safer and more sustainable” bank focused on Britain and western Europe would result in CIB operations in Australia being “sold or wound down”.
Mr McEwan, a New Zealander, knows the Australian market well, previously running Commonwealth Bank’s retail operations before missing out on the top job to Ian Narev and ultimately becoming chief of RBS in 2013.
RBS’s exit marks ongoing upheaval after Malaysia’s CIMB, which entered Australia less than three years ago through the acquisition of most of RBS’s investment bank in Asia, last month revealed it would shut down local operations, affecting 103 staff.
Lloyds left Australia last year after completing the sale of assets to Westpac while Investec wound back its presence. There are also rumours Barclays may be reviewing its Australian operations, but a spokesman said the bank did not comment on speculation.
The RBS spokesman refused to reveal how many staff would be affected or comment further.
“To align to the strengths of corporate and institutional banking with the needs of our core customers in the UK and Western Europe, we plan to reduce our presence in APAC (Asia-Pacific) to a trading and sales operation in Singapore and a sales operation in Japan,” the spokesman said.
“All other CIB activities will be sold or wound down, including CIB’s presence in Australia, Hong Kong, China, India, South Korea, Malaysia, Indonesia and Thailand.”
RBS shrunk dramatically through the 2012 sale of its Australian investment bank to CIMB, leaving the British lender with three main businesses — markets (foreign exchange, rates swaps), transaction services (payments, trade finance) and debt products (corporate lending, debt capital markets).
In an early 2013 interview with The Australian, RBS Australia head Andrew Chick said the sale to CIMB had reduced headcount to about 180 from 620.
The two banks’ exit marks the end of an era, after the operations were spawned out of Barclays’ sale of BZW in the mid-1990s, before being owned by ABN Amro, RBS and finally CIMB.
Yesterday, CIMB officially ceased servicing clients, with head of equity research Andrew Scott expressing “sincere thanks and gratitude” for their support “over the years”, according to a note seen by The Australian.
Rival banks have been flooded with resumes from CIMB staff, sources said.
RBS’s planned shrinking of its CIB division leaves the group “well-placed” to meet Britain’s ring-fencing requirements to safeguard retail operations from riskier investment banking-type activities, the bank said.
It continues the trend of banking behemoths winding back their complex and expensive global operations in slower markets strained by tighter regulation since the global financial crisis.
According to Ernst & Young, global banks “need to be selective about which markets they expand into”.