When the British seafarer James Cook set sail in the late 18th century, he was on a mission to search for "Terra Australis," a large land mass in the southern hemisphere. But everything else about his voyage was relatively uncertain.
Ross McEwan, a native of New Zealand, probably takes a similar view of his mission. The chief executive of the Royal Bank of Scotland, referred to as RBS, has named his major project "Cook," in reference to the great British explorer. His goal is to explore all cost-cutting options to make the bank profitable again and increase its share price.
Mr. McEwan launched the project a year ago. When he presents the bank's annual figures on Thursday, he will also discuss interim results of his cost-cutting program. It is already clear that Mr. McEwan is making more headway than expected, in his plan to lead the bank back to its roots and focus on the domestic market. But he hasn't reached his goal yet, and more interventions are in store for RBS.
They include drastic cutbacks in Germany, where Handelsblatt has learned that more than 50 percent of the positions at RBS in Frankfurt will be eliminated. The British bank still has more than 200 employees in Germany.
But the cost-cutting program also affects other locations, in Asia, the Middle East and continental Europe. RBS apparently plans to reduce its work force in Asia from 2,800 to about 200 jobs. Hundreds of jobs could be eliminated in Europe. "Only sales activities will be retained in the individual countries," say bank insiders, noting that other positions would be concentrated in Great Britain. RBS was unwilling to comment.
The government intends to gradually separate itself from RBS. But the bank's share price needs to recover firs
The bank is under pressure from the British government, which saved it from collapse seven years ago with £45 billion ($70 billion) in taxpayer money, making it the most expensive bank bailout in the financial crisis. In return, the government now holds about 80 percent of shares in RBS.
The government intends to gradually separate itself from RBS. But the bank's share price needs to recover first. It is currently at about 400 pence per share, compared to more than 500 pence when the government intervened.
To return the bank to this level, Mr. McEwan apparently wants to withdraw from more than half of the 38 markets in which RBS remains active. The work force is expected to shrink from about 120,000 jobs in late 2013 to about 90,000, and operating costs are expected to drop by a quarter from the latest figure of £18 billion within three years.
Project "Cook" has already reached its first £1 billion milestone this year, the bank's CEO said in a recent interview with the Financial Times. Analysts had originally seen this goal as too ambitious.
According to financial circles, in 2014 RBS will likely have generated a pretax profit for the entire year for the first time since the crisis, although most of it will be consumed by £4 billion in write-offs on US subsidiary Citizens – a consequence of costly acquisitions under former RBS CEO Fred Goodwin.
He had inflated total assets to £2.4 trillion in 2008, more than Great Britain's entire economic output. Total assets had decreased by more than half by the third quarter of 2014.
The decrease is primarily the result of Mr. McEwan reducing the size of RBS's capital-intensive investment bank. He is also selling off parts of the business, including the international arm of Coutts, a private bank, and U.S. subsidiary Citizens. It already reduced its stake in Citizens to 75 percent in 2014, and RBS now intends to sell off its remaining shares by 2016.
"My aspiration is not to run the world's biggest bank," Mr. McEwan told employees some time ago. "My aspiration is to run the best bank in the UK. That has nothing to do with size."
Robert Landgraf is the deputy head of Handelsblatt's finance section and is based in Frankfurt. Katharina Slodczyk is Handelsblatt's London correspondent. To contact the authors: [email protected] and [email protected]