RBS cautions against a restart of sale of taxpayers' 71% stake

Red Warning Light

Royal Bank of Scotland directors have faced angry questioning from shareholders over planned branch closures and the bank’s treatment of small businesses – and the bank’s finance chief has warned that now may not the best time for the government to restart sales of the taxpayers’ 71% stake in the lender.

Speaking on the sidelines of the bank’s annual shareholders’ meeting in Edinburgh, Ewen Stevenson – who also unexpectedly announced that he is quitting RBS – said recent stockmarket jitters meant that an immediate sale may not be the best timing.

“Obviously when you look at what’s been happening in the markets in the last few days, with Spain and Italy and a significant sell-off in bank stocks, I would be surprised if now is an optimum time to sell stocks,” Stevenson said.

The government is hoping to sell £15bn worth of shares by 2023, around two-thirds of its stake, and reports have suggested that a sale of 10% of the bank’s shares could be imminent.

The final obstacle to a sell-off was removed earlier this month when the bank reached a $4.9bn settlement with US authorities related to selling toxic mortgage-backed securities in the run-up to the financial crisis a decade ago.

However, Stevenson also revealed that the government was unlikely to let the bank know its intentions. “Last time they gave [chief executive] Ross [McEwan] a call out of courtesy a few minutes before they were due to start selling.”

McEwan apologised in his opening remarks for the way the bank’s Global Restructuring Group had treated small businesses seeking help in the wake of the global financial crisis. A report commissioned by the Financial Conduct Authority and finally released in February detailed “disgraceful” practices at GRG.

One shareholder, Neil Mitchell, described how small firms were “targeted and destroyed” and told the board that he was aware of multiple suicides that he believed had been directly caused by the bank.

In the wood-panelled conference hall of the RBS head office – designed by the bank’s disgraced former boss Fred Goodwin – McEwan insisted: “Any financial services business must always hold two things – its financial strength and its reputation. We lost both of these – we fell the furthest – but we have also changed the most. We are a different bank now.”

A decade on from the bank’s taxpayer £45bn bailout, the chairman, Howard Davies, lauded a “landmark year” for the bank. RBS made a £750m profit last year – after nine years of huge losses.

However, there were a number of heated interventions from shareholders. One eventually had the microphone removed as he continued to argue his case for greater accountability.

The meeting also rejected the setting up of a shareholder committee that would give investors power over the pay levels of senior executives.

A number of shareholders argued from the floor that such a committee could avoid a repeat of the “lack of integrity and fleecing of customers” that led to the 2008 bailout.

The bank’s board had urged the proposal be rejected and the government voted its stake against, even though it has previously supported such moves.

Representatives from rural Scotland described the plan for branch closures as “ripping the heart out of local communities”. A protest outside the conference hall, organised by Unite, called on the bank to reconsider its decision to close 62 branches in Scotland. The House of Commons Scottish affairs committee has described the plan as “a devastating blow to the affected communities”. Another 162 closures are planned in England and Wales.

Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk

Community councillor and former RBS employee Alastair Forsyth, who had travelled from Aberdeen to join the protest, pointed out that the move to digital banking was not easy for those living in rural areas with limited broadband access.

McEwan insisted RBS had to respond to changing customer trends and that all growth in payment volumes comes from digital platforms.

Shareholder Peter de Vink expressed his disappointment that Goodwin had not faced legal action last year – which the bank avoided when it settled a legal row with shareholders who had supported a cash call in the months before its near collapse. He accused RBS of paying £1bn to spare its former CEO that embarrassment.

 

 

Powered by Guardian.co.ukThis article was written by Libby Brooks, for The Guardian on Wednesday 30th May 2018 19.41 Europe/London

guardian.co.uk © Guardian News and Media Limited 2010

 

JefferiesAnd the Best Place to Work in the global financial markets 2018 is...

Register for HITC Business News