The Royal Bank of Scotland has formally announced the appointment of Ross McEwan to the position of chief executive alongside its half yearly results including a pre-tax profit of £1.4bn (full results).
McEwan, head of RBS’s retail arm, will begin working from 1 October 2013. Chairman Philip Hampton said he has already become a “champion” for customers and “will be a great chief executive for the group”, acknowledging that the job is one of the most challenging in today’s business world.
McEwan thanked his colleagues and his predecessor Stephen Hester, saying both have done a “remarkable job in saving this Bank”. Hester also gave his blessings, calling McEwan a “person of integrity” and that he is “pleased” to be leaving the bank in his hands.
As we reported yesterday, McEwan’s pay package will be significantly lower than Hester’s. He will receive a £1m annual salary (compared to Hester’s £1.2m) and has requested not to be considered for a bonus in 2013 and 2014.
When Hester was unceremoniously ousted from RBS's leadership, City A.M. editor Allister Heath said the role was a thankless one and that he did not envy his successor.
Never go and work for the government in any high-profile capacity running a nationalised business, unless you are already so rich that you want to do it for free. Never, ever run a state-owned bank, and especially not RBS; you will be disliked whatever you do. Never trust political promises. Don’t listen to anybody who claims you are bound to get a gong for your troubles; even if turns out to be true, it isn’t worth it. Don’t think you are serving the public by taking on a difficult project: nobody – and I mean nobody – will thank you for it.
This comes as RBS says it made a first half pre-tax profit of £1.374bn – up from a loss of £1.682bn in the same period the year before. Group operating profit was £1.678bn, up five per cent.
Joe Rundle, head of trading at ETX Capital, says the actual figures have been overshadowed somewhat by the appointment of McEwan, who will face major pressures to continue readying the bank for privatisation in the light of "damp" headline figures.
Worryingly, the bank’s trading (investment banking) division performed very poorly with operating profit and revenues declining rapidly – this is particularly worrying as it’s the arm of RBS which has been subject of further downsizing at the behest of investors and shareholders given its well-known risky activities.
The markets business also turned in operating profit much worse than expected, in at £93million versus £250million the year before....
So in summary, a particularly weak performance by the bank which is 81% owned by the UK government and unlike its peer Lloyds Banking Group, there’s little to suggest the government is comfortable with selling down its stake in the bank.
The bank is aiming to be ready for privatisation by mid-2014. Investment bank Rothschild is currently looking into the costs and benefits of splitting RBS into a "good" and "bad" bank to help facilitate an easier privatisation. RBS chairman Sir Philip Hampton said today that a split can only take place if the minority shareholders approve it - implying that it is not the government who will have the final say.
Following Lloyd's adding of £450m to its provisions to deal with the mis-selling of payment protection insurance yesterday, RBS added another £185m to its own compensation pot.
In his last half-year report for RBS, Hester credited the bank's employees with the turnaround from "bust bank" to "normal bank" and now hopes it can become "a really good bank".
I will not talk here about future strategy which is now for others to set. But I will say this. My colleagues at RBS know what is needed to create a "really good bank". They want to do just that. This will require time, tools to do the job, clarity and consistency of direction and yes, some luck too. It's a very worthwhile goal....
I am grateful to all who have helped me and worked together on the many tasks at RBS these last five years. To leave things better than you have found them is a valuable prize in business, as in life generally.
Going forward, the bank hopes to boost its fully loaded Basel III core tier 1 capital ratio over nine per cent by the end of the year (having increased it to 8.7 per cent from 7.7 per cent). Operating results in the retail and commercial business are expected to be "resilient with a modest improvement in net interest margin, cost reductions and improving impairment trends", while income from markets-related functions are expected to be muted. The group will continue to cut costs, aiming to deliver operating costs of around £13bn in 2013, reducing this to under £12bn in 2015.