RBS has clarified what’s happening in terms of its restructuring: it’s (only) making 3,500 redundancies, on top of the 2,000 it made in the second half of last year.
The bank states unequivocally that:
“The changes will include an exit from cash equities, corporate broking, equity capital markets, and mergers and acquisitions businesses.”
Before stating more equivocally that:
“We are considering sale or closure options for our cash equities, corporate broking, equity capital markets, and mergers and acquisitions businesses which had income of c£220 million in the nine months to September 2011 and are currently unprofitable.”
RBS says some of its businesses will be safe and even subject to ‘investment’:
"We will continue to invest in our existing fixed income and currencies business and focus on delivering world-class customer service, risk management, IT systems and solutions."
And equity derivatives staff (who were rumoured to be at risk, aren’t):
"We intend to retain our leading investor products business internationally in equity and fixed income derivatives. This business is both profitable and provides valuable funding for RBS."
The bank is also dispensing with 272 corporate bankers.
None of this will happen immediately: RBS has given itself, “up to three years” to implement the changes.
The massive RBS M&A reversal
The big, although not altogether unexpected, shock from today’s news is that RBS is completely pulling out of M&A.
The exit comes after RBS hired John Mcintyre, formerly of Dresdner, in November 2010 – probably on a large package, to build its M&A business. At the time, BarCap and SocGen were also hiring in M&A, but RBS was seen as the better bet. With hindsight, this was very wrong: according to Thomson Reuters RBS ranked 19th for completed UK M&A last year (down from 17th in 2010); Barclays ranked 5th; SocGen ranked 13th.
RBS didn't manage to make much of an impression in ECM either: Thomson Reuters says it ranked 18th last year, down from 14th in 2010.
RBS’s M&A exit also raises queries about the position of veteran Credit Suisse banker John Owen, who joined in January 2011 (also, undoubtedly, on a large package) with responsibility for the banking business across the EMEA region, including DCM, ECM and corporate finance, “as well as the client coverage and sector teams.” Much of Owen’s remit now appears to have disappeared.
M&A headhunters say RBS has some good people and teams, particularly in areas like infrastructure and transport.
When its M&A people go will depend upon transactions outstanding. “People not on live mandates are going as of today,” says one headhunter. “The rest are supposed to leave when their mandates are completed, but the good people will go regardless.”
Will they find other jobs? “Strong revenue generators with deep relationships are always marketable,” says John Axworthy, managing director at search firm J. Robert Scott. “There is some capacity in the market amongst the independent advisory houses and the mid-market players, although that will be exhausted in six months.”
Anyone let go in M&A from RBS is therefore advised to seek new employment soon: “People need to get out there sooner rather than later,” says Axworthy.