3,500 jobs to go as RBS chops its investment arm
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Your support makes all the difference.The state-owned Royal Bank of Scotland took an axe to its investment banking arm yesterday with up to 3,500 job cuts and a sell-off of loss-making businesses, moves hailed by the City as good news for the taxpayer.
Its chief executive Stephen Hester, who is under pressure from the Chancellor, George Osborne, to cut back the bank's risky "casino" banking activities, accelerated the dismantling of the global banking and markets empire built up by its former boss Sir Fred Goodwin.
RBS will now stop trading shares and advising companies on takeovers in one of the biggest retreats by a major investment bank, as the financial crisis and tough new rules on capital requirements hit profits across the industry.
RBS, 83 per cent-owned by the state, employs almost 19,000 staff in investment banking. About half of these are based in London at its two Bishopsgate offices, split between bankers and support staff, although the cull will also hit staff in Hong Kong and the US.
The losses take the number of staff shed by the bank since 2008 to about 35,000, with a further 950 cuts announced in Ulster Bank yesterday.
Mr Hester – who has already slashed the size of the investment bank by half in the past three years – is selling off swaths of RBS's loss-making equities, corporate broking and mergers and acquisitions operations. This includes the stockbroker Hoare Govett, which was inherited with the disastrous deal to buy ABN Amro in 2007. These operations – which have suffered amid low trading volumes, as well as a lack of takeover activity and public offerings – face closure if they cannot be sold. Charles Stanley's analyst Nic Clarke said: "This is good news for the taxpayer as the bank is shutting down unprofitable businesses. But RBS is a leveraged play on the UK economy and until the economy picks up I don't think the taxpayer is going to get its money back." Seymour Pierce's analyst Bruce Packard added that the move was a "positive" for the taxpayer, but said the bank could have been even more radical in scaling back the business.
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