The Royal Bank of Scotland Group plc (RBS), the banking and insurance holding company largely owned by the U.K. government, is contemplating the sale of majority of its corporate banking business in Asia, as reported by Bloomberg.
Impact
The divestiture of corporate banking business in the Asia-Pacific region will impact around 2,000 workers. Royal Bank of Scotland plans to carry on with the business in Singapore, which provides clients dollar, euro and yen fixed-income products and vend off other operations. To purchase the bank’s assets, however, an Indian banking license would be required.
Purpose
Royal Bank of Scotland has been aggressively streamlining its business structure to refocus on its domestic operations by reducing global and investment banking activities. With an aim to enhance focus on core markets and boost profitability, the bank plans to increase its domestic assets from 60% to 80% of its international business.
The bank initiated the initial public offering (IPO) of its U.S. retail banking subsidiary Citizens Financial Group, Inc. (CFG) last year and raised $3 billion. Along with ardently following its expansion strategy and cost-cutting initiatives, the bank recently closed its trading business in Tokyo and the international division of its private bank Coutts is currently in the process of being sold.
Royal Bank of Scotland is now expected to put emphasis on three major groups that comprise – retail customers, small enterprises and large business houses in the UK. Notably, as part of its restructuring activities, Royal Bank of Scotland is set to eliminate a minimum of 30,000 employees in its investment banking division and international operations in the coming years.
Our Take
At a time when the Royal Bank of Scotland is burdened with numerous litigations, we remain encouraged by its restructuring initiatives as these will pave the way for sustainability and growth in the long run.
Other foreign banks such as Standard Chartered PLC (SCBFF) and Lloyds Banking Group plc (LYG) have also been economizing by eliminating jobs and streamlining operations. Recently, Standard Chartered announced its exit from the equity business to curb costs and shift focus on core business.
Currently, Royal Bank of Scotland carries a Zacks Rank #3 (Hold).
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