Royal Bank of Scotland chief executive Ross McEwan has signalled there will be no let-up in his cost cutting drive.
The New Zealand born banker told a major financial conference in London that “tackling costs will be a constant goal for us”.
He also expressed a personal view that he would like RBS to use any excess capital to participate in buying back its own shares when the UK government sells down its stake.
Talking about his strategy to transform the bank Mr McEwan said RBS will exceed its £800 million savings goal for 2015 by about £50m as a result of changes to the bank levy. Around £1.1 billion of costs were shaved last year.
However his admission that there are still “significant” costs to be removed over the coming years is likely to cause further uncertainty for RBS staff who have seen the bank shed tens of thousands of jobs since the financial crisis.
At the Bank of America Merrill Lynch Banking & Insurance conference Mr McEwan said: “Our aim to take our costs to income ratio to below 50 per cent remains a key part of our plan.
“I would also like to highlight we have significant future cost opportunities in all parts of the bank.
“Partly tackling the high costs of our franchises that we are repositioning, but also through operational improvements in the UK personal and business banking and also in our commercial bank.”
Mr McEwan went on outline how he wants RBS to be positioned by 2019 with simpler products and greater trust from customers at the heart of his plan.
Asked whether revenue increases had been factored into the financial projections he stated growth is likely to be limited across the industry until interest rates start to rise.
He said: “So it has to be a cost play for us. Over the next three years to 2018 we have substantial amounts to get us down to the cost to income ratio [of 50 per cent].
“At that point there is still more work to do. A bank like ours needs to be in the 40s.”
Mr McEwan suggested some savings will come from reducing the bank’s processes, registered companies and products.
He also remains committed to overhauling RBS’s corporate and institutional business, UK private bank and Ulster Bank. Job losses in the corporate business were estimated to be up to 14,000 by 2019 according to market estimates published earlier this year.
He said: “We have a clear plan to materially reduce costs and improve their productivity. Ulster Bank and [the] private bank currently have unacceptably high levels of costs in the businesses and require repositioning as leaner, more efficient franchises.
“Our corporate and institutional bank is undergoing a multi-year transformational programme, as well as re-shaping the business in line with our go-forward proposition we will need to re-platform many parts of this business, particularly its back office processes, to materially lower its cost base.”
Asked about potentially returning capital to shareholders Mr McEwan told the audience of analysts and investors the bank had not changed its view that the first quarter of 2017 was the earliest that is likely to happen.
He said: “We have to get ourselves into a position where the PRA is comfortable with us returning money through any of those forms back to our shareholders.
“My own personal view, this isn’t agreed with board, [is] I would rather participate as the government is selling down in the buybacks, be part of that exercise.
“At some stage we would like to put a dividend policy in place but I would like to actually participate, I think it is the best thing for all investors where excess capital goes back through buyback.”
The UK Government still has a 73 per cent stake in RBS but made its first share sale, at a loss of around £1bn, earlier this year.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here