As it goes on records with a formal posting of a net loss of 24.14 billion pounds (($34.4 billion), Royal Bank of Scotland has set a record of not only a massive loss but the biggest restructuring plan in the British corporate history. The intensity and extent of its restructuring plan is all set to hive off most of its international business dealings.
In an attempt to revive UK’s second largest bank RBS from a shameful face, this is the second time the UK government is doing its level best to rectify the situation. The UK government is willing to pump in almost £25 billion and thereby increase its stake in the RBS. Will RBS be finally nationalized is yet another issue altogether.
RBS has also showed willingness to offload 325 billion pounds of toxic assets into an insurance program run by the government. Another set of initiatives being planned include subdividing the bank and selling of its non core divisions within the next few years. Major decisions such as this will be taken under the directive of Nathan Boston who will head the restructuring team.
The RBS has repeatedly apologized for the current scene and while accepting the bad shape of the bank, the acquisition of ABN AMRO Bank was perhaps not the right decision for RBS. Over and above this, RBS Chief Executive Fred Goodwin and former chairman Tom McKillop have already resigned and apologized for the same.
There are a lot of tough and rough decisions to be taken. First and foremost is Sir Fred’s pension to the tune of £650,000 a year at the age of 50 which will be thoroughly scrutinized as to whether the board was aware of the decision while thinking on the possibilities of reducing some or all of this pension facility. The second most difficult decision will be the cost cutting initiative by reducing a sizeable number of jobs and save a large sum of money say approx. £2.5 billion. Thirdly on the anvil would be concentrate on the banks activities with UK and try to dispose of assets worth £240 billion by 2014.
With Government stake at 68%, a new restructuring head Nathan Boston and a new Chief Executive Stephen Hester, everyone is waiting with abated breath when the Royal Bank of Scotland will finally regain its stand alone position and former glory.
Post Office Exchange Rates offers 0% commission on foreign currency orders
