By Marcus Leach
The Royal Bank of Scotland (RBS) have announced reorganisation plans that will see their investment bank downsized, and as a consequence [b]3,500 jobs will be lost.
The wholesale banking changes are to ensure they continue to deliver against the group's strategy announced in 2009. The changes follow a review outlined at its Q3 2011 results, in light of a changed market and regulatory environment.
The changes will see the reorganisation of RBS wholesale businesses into "Markets" and "International Banking" and the exit and downsizing of selected existing activities.
The job cuts, which will be spread between UK and international offices, will take place in 2012 and come on the back of almost 2,000 cuts last year.
"We launched the RBS recovery plan in 2009 with strategic tests for the businesses that the Group would retain," Group Chief Executive Stephen Hester said.
"They would be restructured and managed to sustain strong, customer driven competitive positions, return more than their cost of capital, use a proportionate amount of Group resources and be closely connected with each other.
"This strategy has succeeded in making RBS stronger and placing us on the road to long-term success. We have reduced our balance sheet by some £600 billion and have rebuilt capital ratios that place us among our strongest international peers.
"Our core Retail and Commercial businesses outside Ireland now operate with an attractive return on equity overall. Our investment bank has produced an average return on equity of 19% and delivered over £10 billion in profits since 2009.
"Our Non-Core assets have fallen below £100 billion, ahead of schedule. Profits from our Core businesses have been essential to pay for the clean-up losses of RBS legacy.
"But for our strategy to be effective, it must adjust to fresh challenges. And it is clear that, particularly in the wholesale banking arena, significant new pressures have emerged. The changes we are announcing today seek to ensure that RBS is at the front of the pack in pursuing a strategy that reflects the environment we expect to operate in.
"Our goal from these changes is to be more focussed for customers, more conservatively funded, more efficient and with better, more stable returns for shareholders overall."
The changes will include an exit from cash equities, corporate broking, equity capital markets, and mergers and acquisitions businesses. Significant reductions in balance sheet, funding requirements and cost base in the remaining wholesale businesses will be implemented.
The actions announced today are outlined in the notes below. They will begin immediately, but may take up to three years to implement. RBS will provide final detail with its Full Year 2011 results on 23 February 2012.
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