Hester gives ‘full support’ for bankers in ‘dispiriting’ times
Duncan Kerr | 06 Nov 2009
Royal Bank of Scotland chief executive Stephen Hestersaid staff losses across its businesses have been “damaging but not yet destructive” and admitted that there are “all sorts of reasons why it could be dispiriting to work for RBS “.
However, he said that he will “fight hard” to make sure senior management in the global banking and markets division know they have his “full support”.
Hester’s comments came as the bank, which is majority owned by the UK Government, reported in an interim management statement that operating profits in the GBM division had plunged almost 60% on the second quarter.
Hester, who was speaking during a conference call this morning, said one of the single biggest challenges RBS faces is to “motivate, keep and attract good people” amid what is the biggest ever bank restructuring.
He said the bank’s staff are doing a “heroic job in the face of all the reasons they would have not to”, but that “our task is not being made easier, and there are all sorts of reasons why it could be dispiriting to work for RBS, but we are trying to overcome that.”
“We have lost people across our business this year in way I have described as damaging but not yet destructive. I am hopeful that we can keep it in the damaging but not destructive area, and we are working hard to that,” Hester said.
He added he was giving his full support the senior management of the GBM division, in “restructuring it and tailoring it for the future, in pursuing client flow activities”.
In the three months to the end of September, the GBM division reported operating profits of £375m (€418m), down from £1.15bn in the second quarter and £614m in the same period a year ago.
Total revenues of £1.86bn were robust, but fell slightly on second quarter sales of £2.31bn, although they were up on £1.68bn in the same period a year ago.
Bruce Van Saun, RBS group finance director, said during the conference call that GBM’s rates business was one the strongest performers in the quarter, which countered quarterly sales declines in currencies and commodities due to lower market volatility.
GBM’s flow rates business and its credit market activities drove revenues in the division, with sales from flow rates products at £694m – up on the £536m in the second quarter. Revenues from credit markets hit £690m, but fell on £690m in the second quarter.
Revenues from currencies of £141m were down on £384m in the second quarter and £417m in the same period a year ago. Revenues from commodities of £120m were also down on £239m in the second quarter, but up from £47m this time last year.
Van Saun said: “GBM incurred one large impairment which accounted for £272m of bad debts in the quarter. Absent that it was a very strong quarter. We continue to see GBM performing above or at least consistent with our planned targets,”
The £272m of bad debt relates to what the bank described as “a large individual failure”, but the bank provided no further explanation.
RBS said that it incurred losses of £320m in the third quarter on the fair value of own debt, as the group’s credit spreads fell further.
At group level, RBS posted an operating loss for the three months ended September 30 of £1.53bn (€1.7bn), narrower than the £3.53bn it posted in the second quarter.
Adjusting for movements in the fair value of the bank’s own debt, it posted a pre-impairment operating profit of £2.24bn, compared with £2.09bn in the previous quarter.
Hester said: “Profitability in our core businesses will recover fully only when our own actions are also complemented by more normal interest rates and bad debt experience.”
Write to Duncan Kerr at dkerr@efinancialnews.com
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