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Royal Bank of Scotland will drop its 300-year-old company name and rebrand as NatWest as its chief executive prepares a sweeping overhaul for a new era of less profitable but more sustainable banking.
The lender on Friday unveiled a plan to slash the size of its investment bank and halve the carbon emissions linked to its loan book as it cut long-term profitability targets.
As part of the strategic shift, the bank will stop using the RBS name at group level in favour of the less scandal-tainted NatWest brand, though Royal Bank of Scotland will still be used in its Scottish branch network.
Howard Davies, chairman, said the bank was making the change because NatWest had become its largest brand since its post-financial crisis restructuring. “It really makes no sense for us to continue to be called RBS, which was a concept designed for a global group of banks we no longer have,” he said.
RBS suffered a significant blow to its reputation during the 2008 crisis when it was saved from collapse by a £46bn government bailout. The bank has also been entangled in a string of scandals, including Libor rigging and mistreating small businesses.
Sir Howard has previously admitted that the RBS brand had been badly damaged over the past decade, while NatWest had not been so tarnished.
“The bailout casts a long shadow,” he said in a lecture in 2018. “But our most important brand NatWest . . . is in fact highly rated.”
NatWest was formed through the merger of National Provincial Bank and Westminster Bank in 1968. RBS bought the group — which was more than three times its size — in a £22bn hostile takeover in 2000. Its former chief Fred Goodwin played a key role in the takeover, which kicked off a period of aggressive expansion that ultimately ended with RBS’s near collapse in 2008.
Alison Rose, RBS’s new chief executive, said the taxpayer-owned bank was entering “a new era” and pledged to build “a more sustainable business” in the face of “unprecedented disruption”.
The bank had been widely expected to overhaul its struggling NatWest Markets investment banking business and on Friday confirmed it would attempt to reduce its risk-weighted assets — a key measure of balance sheet size — from £38bn to about £20bn over the medium-term, including a reduction of between £6bn and £8bn this year.
Ms Rose said NatWest Markets said would become “a much smaller and simpler part of the business” with a more limited focus on serving corporate and institutional clients from the rest of the bank.
The new approach was announced as RBS reported better than expected fourth-quarter results. Total revenues of £4.2bn were 35 per cent higher than the same period in 2018, although the comparison was flattered by one-off gains linked to the sale of a Saudi bank in which it owned a stake. Net profit for the quarter was £1.5bn, a 230 per cent year-on-year increase.
But while its short-term results beat forecasts, the company was cautious about future growth. RBS, which had previously said it would be unable to reach its 12 per cent return on equity target this year, on Friday abandoned the goal entirely in favour of a “medium- to long-term” target of between 9 and 11 per cent.
Shares in RBS fell 6.6 per cent in early trading, to 214p. Joseph Dickerson, an analyst at Jefferies, said he expected investors to be disappointed by the bank’s smaller than expected dividend. The group proposed a full-year payout of 8p per share — worth £968m — compared with consensus forecasts of 9.5p per share.
Sir Howard said the bank would prefer to use its excess capital to buy back some of the government’s shares if it decides to resume reprivatising the bank this year. “It’s prudent to ensure we have the capital to participate in such a buyback,” he said.
The UK government still owns a 62 per cent stake in RBS.
Ms Rose said she wanted RBS to become a “purpose-led organisation” that would balance the interests of all stakeholders. It follows several major rivals trying to shift their focus from shareholder returns during the past year. An important part of the move will be efforts to combat climate change, with it matching rival Lloyds Banking Group’s recent pledge to halve the emissions linked to its loan book over the next decade.
Ms Rose said: “This is the defining issue of our generation and we have a responsibility to play an active role.” She acknowledged, however, that the plan would be difficult, not least because the bank did “not yet fully understand what this will require and how it will be achieved”.
RBS confirmed the previously reported departure of Mark Bailie, former chief operating officer and the chief executive of its digital banking initiative Bó. Marieke Flament, who already leads RBS’s digital business bank Mettle, will also take responsibility for the consumer-facing Bó.
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