The Royal Bank of Scotland Group plc (RBS) is planning to scale back its fixed-income trading operations in Japan, leading to nearly 200 job cuts. This was first reported by Bloomberg News.
RBS Securities Japan Ltd. is one of the 23 primary bond dealers in Japan, as per data from the Ministry of Finance. Further, the bank was the 10th biggest buyer of short-term bonds for six months ended Sep 30, 2014.
However, with the Bank of Japan aggressively buying bonds to boost the country’s economy, it is becoming difficult for dealers to earn from bond-trading operations. Further, RBS Securities had reported a loss of ¥5.7billion ($48 million) for fiscal 2014 (ended Mar 31).
RBS Securities will likely give up its primary dealership in the government bond market of Japan. The firm executives are expected to meet Financial Services Agency officials later this week with the detailed closure plan. Notably, the firm will continue to service client assets with nearly 30 staff members. Once the approval from the Financial Services Agency is received, RBS is expected to notify clients subsequently.
Apart from RBS, several other banks are currently struggling to remain profitable in Japan. Citigroup Inc. (C) is planning to sell its Japanese consumer-banking business to Sumitomo Mitsui Financial Group Inc.
In an effort to improve efficiency and save expenses, RBS has been reorganizing its operations on a global scale. The company plans to save nearly 1 billion pounds ($1.6 billion) in costs through this restructuring.
Notably, RBS has also started seeking bids for its international private bank, Coutts International. The Goldman Sachs Group, Inc. (GS) is managing the sale of this bank, which has attracted interests from Credit Suisse Group AG (CS) and Julius Baer Group Ltd., among others.
We believe that by exiting its Japanese fixed-income trading business, RBS is taking a step in the right direction. This would surely aid the company in its attempts to check expenses.
Currently, RBS carries a Zacks Rank #3 (Hold).
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