AFTER substantial losses, Royal Bank of Scotland has announced plans to sell assets and further reduce its investment banking business to appease regulators and its biggest shareholder, the British government.
The bank said it planned to sell a stake in the Citizens Financial Group, the US lender it bought in 1988, through an initial public offering in two years. It also said it would continue to reduce its investment banking operations by cutting risky assets and eliminating jobs. The moves are intended to help bolster capital and refocus operations, part of a multi-year turnaround effort initiated by Stephen Hester, the bank's chief executive.
Royal Bank of Scotland "is four years into its recovery plan, and good progress has been made", Mr Hester said. "We are a much smaller, more focused and stronger bank. Our target is for 2013 to be the last big year of restructuring."
Like many rivals, Royal Bank of Scotland is struggling with the legacy of the financial crisis and legal issues. On Thursday, it reported a bigger than expected loss, tied partly to its legal troubles.
The bank, in which the British government holds an 82 per cent stake after a bailout in 2008, posted a net loss of £5.97 billion in 2012, much larger than the £2 billion loss recorded in 2011. Analysts had expected a loss of £5.1 billion.
The rising losses reflect the bank's regulatory and legal problems.
Royal Bank of Scotland said that it had set aside an additional £1.1 billion to compensate clients to whom it had improperly sold insurance products, bringing the total provision to £2.2 billion. The bank, which is based in Edinburgh, agreed this year to pay $US612 million ($A597 million) to British and US authorities to settle accusations of rate-rigging.
Eager to get back some of the £45.5 billion it invested in Royal Bank of Scotland, the British government recently increased pressure on the bank's management to expedite the reorganisation.