“Probably the worst managed bank this country has ever seen.”

16th November 09 – “Probably the worst managed bank this country has ever seen.”

The quote from Lord Myners, the City minister, relates to none other than the Royal Bank of Scotland (RBS) as it was announced that it would use the Government’s Asset Protection Scheme (APS) for £282b of toxic assets. It will stand the first £60b of losses itself.

A further £25.5b is to be pumped into the bank (in “B” shares with a coupon of 7%) to add to the £20b of existing support and giving the taxpayer an 84.4% holding in the beleaguered outfit. A further £8b could be injected in the future should the tier 1 ratio fall below 5%.

Like Lloyds Banking Group (see entry dated 9th November 09) concessions have been dragged out of the bank as one cost of the saviour efforts. Cash bonuses are to cease for those on salaries above £39,000 pa in favour of shares and even new recruits who were appointed on multi-million “guarantees” will be caught. Directors are to defer bonuses until 2012 and clawback clauses will apply. RBS will have a lending target of £25b for this year and next.

Facing up to Europe’s competition authorities, RBS will sell its insurance arm Sempra, its global payments business and 312 branches.

Lloyds and RBS taken together, it is estimated that 10% of all personal banking and small business arrangements will pass to new owners over the term of the deal.

All that “goodwill” on past acquisitions wiped out at a stroke.

More at http://www.jgwalkersmith.co.uk