Financial services firm Royal Bank of Scotland Group plc (RBS, RBS.L) said Friday that more job cuts are expected in the UK and internationally. The bank also stated that the acquisition of ABN AMRO was a 'wrong deal'. RBS is holding its Annual General Meeting today followed by a General Meeting.
In an extract from a speech published ahead of the meetings, the bank's Chairman Philip Hampton said that the bank has suffered a major financial hit, and continued collateral damage from public criticism will compound the problem and not resolve it. According to him, the bank's operating environment is tough and it is asking its staff to knuckle down for a three to five year project. Many difficult decisions lie ahead, Hampton noted.
He said the bank has to achieve its annual cost reduction targets of GBP 2.5 billion within the next three years. All costs will be scrutinized from the bank's back offices to its highest offices and some of the bank's people will lose their jobs.
As so many of our customers make tough decisions in the face of the worst global recession in decades we have no option but to do the same. We can't yet know how many will lose their jobs or where, Hampton said.
In the UK, the bank has announced headcount reductions of 2,700 so far this year. We can only be honest and say that this will not be the end of the story and more are expected in the UK and internationally in the period ahead, Hampton noted.
According to him, only a minority of staff in the bank was in any way responsible for the major credit market losses it suffered in 2008. The bank's new leadership has a clear and agreed roadmap to return the company to standalone strength in the next three to five years, he added.
Hampton also stated that the bank intends to return to paying dividends as soon as practicable, taking account of the Group's financial position and prospects and all other relevant constraints.
Further, commenting on the acquisition of ABN AMRO, Hampton said, .I don't think there can be any doubt that the key decision that led RBS to its difficulties was the acquisition of ABN AMRO. That is the painful reality that we can now do nothing to change. With the benefit of hindsight it can now be seen as the wrong price, the wrong way to pay, at the wrong time and the wrong deal.
As per him, 2008 was the most difficult year in the Group's history, reporting an after-tax loss of GBP 7.9 billion on a pro forma basis. The bank also recorded goodwill write-downs of GBP 16.2 billion relating to its previous acquisitions, mainly ABN AMRO. However, the bank's estimate is that, excluding its share of ABN AMRO, the bank would have made an operating profit before tax and goodwill impairment in 2008. This estimate includes the impact of credit market write-downs and other asset impairments.
RBS ended Thursday's trading at $8.15 on the NYSE, up $0.80, on a volume of 428,200 shares.
RBS.L is trading 31.90 pence, up 3.70 pence, on a volume of 79.91 million shares.
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