RBS confirmed today that it suffered the biggest net loss in UK corporate history last year: an eye-popping £24.1bn. On top of a £16bn goodwill write-off, mostly relating to its disastrous acquisition of ABN Amro, it also made an £8bn loss in its underlying business. Already 70% state-owned, it’s now having to issue fresh shares to the taxpayer so it can participate in the Government’s Asset Protection Scheme, which will see the Treasury guarantee £325bn of its dodgiest assets. It’s also set to wield the axe on up to 20,000 jobs – so it’s a bad time to admit that disgraced ex-CEO Sir Fred Goodwin has walked off with a £650,000-a-year pension…
RBS actually made a pre-tax loss of £40.7bn, although this drops down to £24.1bn due to various accounting technicalities (and even this number isn’t quite as gigantic as some expected). So it’s going to need another massive injection of taxpayers’ money – possibly as much as £25bn in total. (Our voting stake will be capped at 75%, but in practice we could end up owning up to 95%, which is about as close to full-on nationalisation as you can get). Under the terms of the Government’s asset insurance scheme, it will be liable for the first £19.5bn of losses on this £325bn, and 10% thereafter, with the Treasury picking up the rest of the tab.
New boss Stephen Hester’s priority will be a complete overhaul of the battered bank. He said today that he’s going to hive off about £240bn of assets into a separate ‘Non-core division’ (basically a bad bank), and has hired Abbey CFO Nathan Bostock to run the division down. Hester also plans to chop the bank’s cost base by more than £2.5bn a year, mostly by shrinking the size of its overseas investment banking (in 36 of the 54 countries where it has a presence). This will inevitably mean ‘substantial’ job losses, he confirmed today – possibly as many as 20,000, which would be about 10% of the workforce.
So the last thing he needed was the revelation that Sir Fred Goodwin, the former CEO who’s widely blamed for the reckless strategy that got RBS into this mess, has apparently amassed a pension pot worth £16m – from which he’s already drawing £650,000 a year. So much for ‘no rewards for failure’… RBS says the pension arrangements (which are similar to those of the bank’s other top execs) are legally binding – but the Treasury is crawling over the details with a fine-tooth comb trying to find some way of clawing the money back. Alistair Darling suggested today that Sir Fred should give it up voluntarily, as the Government continues to wash its hands of its former best banking buddy.
The only good news today was that RBS has promised as part of the deal to boost lending by £25bn both this year and next, including £9bn for mortgages. An odd move for a bank in such disarray, but at least it should mean some extra credit in the system...
In today's bulletin:
RBS slumps to record loss - and Sir Fred gets £650k pension
British Gas fails to profit from higher prices
Berkeley plans to make hay from housebuilder woes
SMEs' unhealthy desire for Fry and Sugar
Why small businesses need strategy more than ever