February 24, 2015 / 12:12 PM / 2 years ago

Exclusive: RBS restructuring chief to shrink investment bank

4 Min Read

A sign is seen outside a Royal Bank of Scotland building in central London January 28, 2014.Paul Hackett

LONDON/HONG KONG (Reuters) - Royal Bank of Scotland (RBS.L) will hand restructuring chief Rory Cullinan the task of overseeing another major scaling back of its investment bank, sources told Reuters, allowing it to focus on lending to British households and businesses.

Cullinan will take over responsibility for RBS's investment bank from Donald Workman, currently executive chairman for corporate and institutional banking, the sources said. It is not clear what role Workman will take.

Cullinan already runs RBS's internal 'bad bank' and is overseeing the sale of its U.S. business Citizens and its Williams & Glynn business in Britain.

The bank, 79 percent-owned by the government, is under pressure from lawmakers to do more to support the domestic economy.

Chief Executive Ross McEwan said last year that he wanted to increase the proportion of assets that RBS holds in Britain to 80 percent of its global business from 60 percent at present.

Cullinan was appointed to run RBS's 'bad bank' in December 2013. He is on track to sell or wind down the majority of the 38 billion pounds ($58.6 billion) of unwanted assets placed within it by the end of 2015, a year ahead of schedule and his success in that role has persuaded McEwan to enlarge his remit, the sources said.

"He’s been phenomenal," said Bernstein analyst Chirantan Barua. "Given his experience and what he’s delivered, I would not be surprised at all that Ross gives him something more. What is next in line in terms of cutting is the investment bank."

The bank hopes that slimming down and simplifying its business will enable it to bolster its capital and generate better returns, making it more attractive to investors and easier for the government to return to private ownership.

RBS's investment bank was built into one of the biggest in the world by former chief executive Fred Goodwin in the years before the financial crisis, and it grew further by the takeover of Dutch bank ABN AMRO in 2007.

Its investment bank had more than 20,000 staff and risk-weighted assets of 278 billion pounds at the end of 2008, almost half of RBS's massive balance sheet that it has dramatically shrunk in the last six years.

Asian Retreat

RBS is expected to announce that it will significantly scale back its operations in Asia leaving about 200 staff in the region, down from 2,800 at the end of last year, when it unveils full-year figures on Thursday, the sources said.

The move will mark the latest step in RBS's sharp retreat from both Asia and investment banking in the past six years following its 45.5 billion pound bailout during the financial crisis.

The bank had more than 12,000 staff in Asia at its peak, which included retail businesses that used to be part of ABN and were mostly sold in 2009.

Cullinan will also take responsibility for managing RBS's exit from several European markets, the sources said.

RBS has been in Asia Pacific since the 1820s and currently has offices in 10 countries in the region. Singapore is one of its global operational hubs. The bank currently supports clients based in Asia Pacific and execution services in Asian markets for U.S. and European clients.

RBS, which is also expected to announce the appointed of ex-financial regulator Howard Davies as its new chairman on Thursday, is set to report an underlying pretax profit of about 4.1 billion pounds, according to a Reuters poll.

But that is likely to be largely wiped out by a write down on the value of its U.S. bank Citizens of about 4 billion pounds, according to industry sources.

Editing by Sinead Cruise and Keith Weir

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