Ross McEwan is to make his first presentation to the City as boss of Royal Bank of Scotland on Friday amid speculation that the outcome of a government review into spinning off a bad bank will be announced with the third quarter results.
The New Zealander is expected to set out an ambition to end lingering concerns about the bank's financial strength after taking over from Stephen Hester on 1 October. It is thought McEwan will outline the outcome of the government-commissioned review into whether a "bad bank" of underperforming loans should be spun out of 81% taxpayer-owned RBS.
He is also expected to publish a report the bank commissioned from the former Bank of England deputy governor Sir Andrew Large after it faced criticism about its lending to small businesses.
It is thought the government will step back from asking RBS to create an extensive bad bank holding as much as £120bn of problem loans. But McEwan is expected to set out his thoughts on the future of the RBS investment bank, its US arm, Citizens, and its private bank Coutts – banker to the Queen.
Citizens, already due for a stock market flotation in 2015, could be sold off more quickly, and there has been repeated speculation that Coutts could also be earmarked for sale. The investment bank, where the headcount has already shrunk from 25,000 before the bailout to 9,000, could be forced to retrench further.
The new chief executive is not expected to use the third quarter results to outline his strategic vision for the bank he joined a year ago as head of the retail operations. Sky News reported last night however that he would open talks with the government over restarting dividend payments to shareholders, although it could be years before such a move was approved.
McEwan has been readying the bank's staff for the outcome of the government review into a breakup. He recently told them he believed it would resolve an outstanding uncertainty about the future of the bank, bailed out five years ago with £45bn of taxpayer money.
In an email to staff a fortnight ago, he said: "The future of this company will not be about whether we operate in particular areas or where our problem assets sit. The future of this company is about how good a job we do for our customers, including those who are having difficulty repaying their loans. And it will be about how well we live up to all our responsibilities, particularly those we have to the UK."
The same week, George Osborne told the Daily Telegraph he was close to a decision on RBS. "We are looking at the case for a bad bank and if not a bad bank, what is the alternative strategy that really gets on top of the problems in that bank and goes on being what I want it to be, which is a bank supporting the British economy," he said.
The City is anxious about the creation of a bad bank although speculation in recent days has focused on the expansion of the existing non-core division. Even so, Ian Gordon, banks analyst at Investec, said: "We still fear that, even in the absence of an outright good bank/bad bank split, more covert steps may still destroy value".
Mortgage firm sues over Libor
US mortgage finance company Fannie Mae sued nine of the world's largest banks yesterday, including Barclays and Royal Bank of Scotland, accusing them of colluding to manipulate interest rates and seeking more than $800m of damages.
In a complaint filed in the US district court in Manhattan, the company accused the banks of manipulating the London Interbank Offered Rate, or Libor, as well as other interest rate benchmarks.
Fannie Mae said this manipulation caused it to lose money on interest-rate swaps and other transactions. It is also seeking punitive damages.
Smaller rival Freddie Mac filed a similar lawsuit in March against more than a dozen banks.
"Fannie Mae filed this action to recover losses it suffered as a result of the defendants' manipulation of Libor," a spokesman said. "We have a responsibility to be good stewards of our resources."
Four of the banks sued by Fannie Mae – Barclays, Rabobank, Royal Bank of Scotland and UBS - have previously settled with regulators over similar allegations and admitted wrongdoing.
The other bank defendants are Bank of America, Citigroup, Credit Suisse, Deutsche Bank and JPMorgan Chase.
Representatives of Bank of America, Barclays, Citigroup, Deutsche Bank, JPMorgan and RBS declined to comment. The other banks did not immediately respond to requests for comment.
The case is Federal National Mortgage Association v Barclays Bank Plc et al, US District Court, Southern District of New York, No. 13-07720.
RBS has already signalled it is involved in the new global investigation into foreign exchange trading and last night it was reported to have suspended two traders.
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