The Royal Bank of Scotland Group Plc is planning to eliminating jobs and closing branches as it seeks to bolster profitability as the global bank prepares to cut more than 1 billion pounds ($1.25 billion) of annual operating costs, according ot media reports citing a person with knowledge of the plans.
Senior executives believe RBS has more staff than it requires and will cut more jobs while the Edinburgh-based lender probably won’t reveal a headline figure for role reductions, the reports said.
The source asked not to be identified because the details are private.
Alongside its annual results, the bank will also unveil fresh plans to meet profit targets on February 24, RBS has said. RBS needed to cut 15,000 jobs, reported The Sunday Times in a report where it quoted an analyst that it didn’t identify. “We do not recognize this report,” said an RBS spokeswoman while reacting to the news report in the paper and who declined to comment on the plans of the banks.
However, after the Bank of England cut interest rates last year, plans lower the bank’s cost-to-income ratio, a key measure of profitability, to below 50 percent by 2020, of Chief Executive Officer Ross McEwan’s, was blown off-course to a great extent. Analysts at UBS Group AG led by Jason Napier wrote in a note to clients last month that the chief executive officer probably needs remove about 1 billion pounds of annual expenses to reach his target.
“Given all the restructuring RBS has already undergone, such a change from here would be challenging and expensive to deliver,” wrote Napier, who has a neutral rating on shares.
The person said that the RBS’s cuts may need to exceed 1 billion pounds. Making it necessary to cut 1.5 billion pounds to 1.6 billion pounds of expenses is RBS’s to target a total cost base of 7 billion pounds by 2020, said David Lock, an analyst at Deutsche Bank AG, who made this notation in a report that he wrote this month.
Sources with knowledge of the RBS plans of job cuts said that the lender will probably attempt to gain a more simplified processes that would help in the elimination of the need to keep and hire as many staff as it does now to handle tasks such as opening bank accounts and will make cuts in administrative roles to cut down on operating costs. The bank would also consider investing in upgrading its IT systems to improve efficiency and lower expenses even as the lender will look to cut costs, sources reportedly told the media.
(Adapted from Bloomberg)