The value of the day in Europe – ROYAL BANK OF SCOTLAND will become NatWest and cut its investment bank

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The value of the day in Europe - ROYAL BANK OF SCOTLAND will become NatWest and cut its investment bank
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(hooly-news.com) – Royal Bank of Scotland (-6.43% to 214 pence), which will soon take the name of NatWest, announced a major reduction in the investment banking wing when it published its annual results. Founded in 1727, the British bank recovers its virginity inexpensively after being saved from the sinking by the State during the great financial crisis. He is still the majority shareholder. Measured in risk-weighted assets, the size of the investment bank will be halved.

It will refocus NatWest Markets products and services on its corporate and institutional clientele.

“We are still too complicated for our customers. A large part of the potential value of this bank is enclosed in business sectors and business models that are too complex and generate too little return. This complexity also generates ‘bad costs’ – costs that provide no benefit to customers, “said its Managing Director, Alison Rose.

Royal Bank of Scotland said that refocusing its market activities, NatWest Market, and further cutting costs for the group will cost it between £ 0.8 billion and £ 1 billion this year. 250 million savings are also expected.

The bank plans to end the year with risk-weighted assets of £ 185-190 billion versus £ 179.2 billion. If the regulations will inflate them by 10.5 billion, the refocusing of NatWest Market will reduce them from 6 to 8 billion pounds.

In the medium term, it targets risk-weighted assets of 20 billion for its market activities against 37.9 billion currently.

In the medium to long term, the British establishment aims for a return on tangible equity of between 9% and 11%, compared with 9.4% this year. Like many European banks, it abandoned its objective of profitability of 12% for this year, questioning the weakness of growth.

In the fourth quarter, Royal Bank of Scotland made profit before tax of 1.546 billion pounds against only 572 million, a year ago.

The hard capital ratio is stable at 16.2% and it targets a ratio of 13% to 14% in the medium term, including around 14% in 2021.

It announced a final dividend of 3 pence and an extraordinary dividend of 5 pence. The future NatWest aims for a distribution rate of 40% in the medium to long term. The bank is considering other distributions, including share buybacks and special dividends.

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Finance – Banks

Life is hard for European banks! The latter are first subject to very strict regulation, which imposes capital and liquidity constraints (Basel III). American banks, which do not have these constraints, generate higher margins and dominate the lucrative niche of investment banking. In addition, low or zero interest rates weigh on profitability. Added to this is competition from Fin Tech and Gafa. Moreover, large establishments are buying fintechs to counter this technological threat. But the fight against Facebook or Google, which offer free services by paying for the use of payment data, looks very complex.