Jump to content

NatWest Group

From Wikipedia, the free encyclopedia

This is an old revision of this page, as edited by 147.114.226.173 (talk) at 16:06, 14 October 2008 (→2008 Financial Crisis). The present address (URL) is a permanent link to this revision, which may differ significantly from the current revision.

The Royal Bank of Scotland Group Public Limited Company
Company typePublic (LSE: RBS)
IndustryFinance and Insurance
Founded1727
HeadquartersEdinburgh, Scotland, UK
Key people
Sir Tom McKillop, Chairman
Stephen Hester, CEO
ProductsFinancial Services
RevenueIncrease £31,115 million (2007)
Increase £9,900 million (2007)
Increase £7,712 million (2007)
Number of employees
170,000 (2008) [1]
SubsidiariesRoyal Bank of Scotland
NatWest
Ulster Bank
Direct Line
Citizens Financial Group
ABN AMRO
Coutts
Adam and Company
Child & Co
RBS Greenwich Capital
Websitewww.rbs.com

The Royal Bank of Scotland Group Plc (LSE: RBS) is a banking and insurance holding company in the United Kingdom based in Edinburgh, Scotland, principally owned by Her Majesty's Government.

[2] It includes The Royal Bank of Scotland Plc[3] founded in 1727 by a Royal Charter of King George I, National Westminster Bank Plc in England and Wales and Ulster Bank Limited in Ireland.[4]

At its peak the RBS Group was the largest banking group in Scotland, the second largest in the UK and Europe (fifth in stock market value), and the fifth largest in the world by market capitalisation. According to Forbes Global 2000, it was the tenth largest company in the world.[5] Its shares have a primary listing on the London Stock Exchange. The registered head office of the group and the UK clearing bank are located at St Andrew Square. In 2005, Queen Elizabeth II opened the bank's new head office building in Gogarburn, Edinburgh.

The RBS Group operates a wide variety of banking brands offering personal and business banking, private banking, insurance and corporate finance throughout its operations located in Europe, North America and Asia. In the UK and Republic of Ireland, the main subsidiary companies are: The Royal Bank of Scotland; National Westminster Bank; Ulster Bank; Drummonds and Coutts & Co. In the United States, it owns Citizens Financial Group, the 8th largest bank in the country. It is the second largest shareholder in the Bank of China, the world's fifth largest bank by market capitalization in February 2008.[6] Insurance companies include Churchill Insurance, Direct Line, Privilege, and NIG.

The group issues banknotes in Scotland and Northern Ireland and, as of 2008, Royal Bank of Scotland is the only bank in the UK still to print a £1 note.

On 13 October 2008, it was announced that the British Government is set to take a 60% stake in the Group, a move aimed at recapitalising the bank. The aim is to "make available new tier 1 capital to UK banks and building societies to strengthen their resources permitting them to restructure their finances, while maintaining their support for the real economy, through the recapitalisation scheme which has been made available to eligible institutions"

History

For information on the history of the Royal Bank of Scotland PLC see the Royal Bank of Scotland article

Takeover bids

During the late 1970s and early 1980s the Royal Bank was the subject of three separate takeover approaches. In 1979, Lloyds Bank, which had previously built up a 16.4% stake in the Bank, made a takeover approach for the remaining shares it did not own. The offer was rejected by the board of management on the basis it was detrimental to the Bank’s operations. However when the Standard Chartered Bank, proposed a merger with the Bank in 1980, the board of management responded favourably to the offer. Standard Chartered Bank was headquartered in London, although most of its operations were in the Far East, and the Royal Bank saw advantages in creating a truly international banking group. Approval was received from the Bank of England, and the two banks agreed a merger plan that would see the Standard Chartered acquire the Royal Bank and keep the UK operations based in Edinburgh. However the bid was scuppered by the Hongkong and Shanghai Banking Corporation (HSBC) which tabled a rival offer. The bid by HSBC was not backed by the Bank of England; and was subsequently rejected by the Royal Bank’s board of management. However the British government referred both bids to the Monopolies and Mergers Commission; and both were subsequently rejected as being against the public interest. [7]

The Bank did obtain an international partnership with Banco Santander Central Hispano of Spain, each bank taking a 5% stake in the other. However this arrangement ended in 2005, when Banco Santander Central Hispano acquired UK bank, Abbey National– and both banks sold their respective shareholdings.

International expansion

The first international office of the bank was opened in New York in 1960. Subsequent international banks were opened in Chicago, Los Angeles, Houston and Hong Kong. In 1988 the bank acquired Citizens Financial Group, a bank based in Rhode Island, United States. Since then, Citizens has acquired several other American banks, and in 2004 acquired Charter One Bank to become the 8th largest bank in the United States.

The Royal Bank also opened offices in Europe and now has subsidiaries in: Austria, Switzerland, France, Italy, Germany, Greece, Spain, Portugal, Denmark, Norway, Sweden and Federation of Bosnia and Herzegovina In the Asia-Pacific region, the bank has offices in: Australia, China, Hong Kong, Japan and Singapore.

National Westminster Bank

The late 1990s saw a new wave of consolidation in the financial services sector. In 1999, the Bank of Scotland launched a hostile takeover bid for English rival, the NatWest. The Bank of Scotland intended to fund the deal by selling off many of the NatWest’s subsidiary companies, including Ulster Bank and Coutts. However, the Royal Bank subsequently tabled a counter-offer, sparking off the largest hostile takeover battle in UK corporate history. A key differentiation from the Bank of Scotland’s bid was the Royal Bank’s plan to retain all of NatWest’s subsidiaries. Although NatWest, one of the "Big 4" English clearing banks, was significantly larger than both Scottish banks, it had a history of poor financial performance, and plans to merge with insurance company Legal & General were not well received, prompting a 26% fall in share price[8].

On 11 February, 2000, the Royal Bank of Scotland was declared the winner in the takeover battle, becoming the second largest banking group in the UK after HSBC Holdings. NatWest and the Royal Bank of Scotland became subsidiaries of the holding company; The Royal Bank of Scotland Group. NatWest as a distinct banking brand was retained, although many back office functions of the bank were merged with the Royal Bank's leading to over 18,000 job losses throughout the UK.[9]

Recent history

In 1967, RBS became the first Scottish bank to install an Automated Teller Machine, and by 1980 the service, known as Cashline had become the busiest ATM network in the world. Today it is now the largest privately owned ATM network in the UK, it is also a member of the LINK ATM network. In 1997, RBS was the first bank in the world to make its ATMs available to all cardholders. The word Cashline, in Scotland at least has become a generic term for an ATM.

In August 2004, the bank expanded into China, acquiring a 10% stake in the Bank of China for £1.7 billion [10].

A new international headquarters was built at Gogarburn on the outskirts of Edinburgh, and was opened by Queen Elizabeth II and Prince Philip, Duke of Edinburgh in 2005. The St Andrew Square office still remains the official registered head office.

The bank was the 2005 recipient of the Wharton Infosys Business Transformation Award, an award given to enterprises and individuals who use information technology in a society-transforming way.

The Group is part of a consortium with Belgian bank Fortis and Spanish bank Banco Santander that acquired Dutch Bank ABN AMRO a on 10 October, 2007. Rivals speculated that RBS had overpaid for the Dutch bank[11] although the bank pointed out that of the £49bn paid for ABN Amro, RBS's share was only £10bn[12].

Coutts Bank's international businesses were renamed RBS Coutts on 01 January 2008.

2008 Financial Crisis

After previous denials following press coverage[12], on the 22 April, 2008 RBS announced a rights issue which aimed to raise £12billion in new capital to offset a writedown of £5.9billion resulting from the bad investments and to shore up its' reserves following the purchase of ABN-Amro. This is the largest rights issue in British corporate history[13]. The bank also plans to divest some of its' subsidiaries to raise further funds, notably its insurance divisions Direct Line and Churchill[14].

There were fears however that the bank may not receive the full asking price of £7bn and may be forced into seeking more funds from shareholders[15].

Despite this fundraising and amid the worsening of the 2008 Global Financial Crisis, on the 13th October 2008, British Prime Minister Gordon Brown announced a UK Government bailout of the financial system.

The Treasury would infuse £37 billion ($64 billion, €47 billion) of new capital into Royal Bank of Scotland Group Plc, Lloyds TSB and HBOS Plc, to avert financial sector collapse. He stressed, however, that it was not "standard public ownership" and that the banks would return to private investors "at the right time."[16][17] Alistair Darling stated UK taxpayers would benefit from the government's rescue plan, as it will have some control over RBS in exchange for £5 billion in prefernce shares and underwriting the issuance of a further £15 billion in ordinary shares. If shareholder take-up of the share issue was 0% then total government ownership in RBS would be 58% and if shareholder take-up was 100% then total government ownership in RBS would be 0%.[18] The government will acquire a mix of preference shares and ordinary shares. [19]

As a consequence of this rescue the chief executive of the group Sir Fred Goodwin offered his resignation which was duly accepted.

Financial data

Financial data in GBP millions
Year 2002 2003 2004 2005 2006 2007
Income 16 815 19 229 22 754 25 902 28 002 31 115
Profit before tax 6 451 7 151 8 101 9 763 10 864 9 900
Net profit 3 207 4 039 4 256 5 551 6 497 7 712
Market capitalisation 43 200 48 800 55 600 56 100 62 800 N/A

Sources: OpesC[20]

Branding

The RBS Group uses branding developed for the Bank on its merger with the National Commercial Bank of Scotland in 1969[21]. The Group's logo takes the form of an abstract symbol of four inward-pointing arrows known as the "Daisy Wheel" and is based on an arrangement of 36 piles of coins in a 6 by 6 square[21], representing the accumulation and concentration of wealth by the Group[21].

Corporate Structure

The Royal Bank of Scotland's office in Fleet Street, London- also home to Child & Co.

The RBS Group is split into 8 operating areas. Each operating area has several subsidiary businesses.

Retail Banking

This is the group’s main UK business, offering personal and business banking services. Services are operated under both the Royal Bank of Scotland and NatWest brand names. Key subsidiaries include:

Wealth Management

This is the group’s private bank division providing services to wealthy individuals:

Retail - Direct Channels

This division is responsible for the group’s credit card businesses in the UK and Europe; including internet and telephone based banking brands; and processing facilities for retailers. Key subsidiaries and brands include:

Corporate Markets

This division consists of UK Corporate Banking which provides financing, leasing services and transaction processing to corporate customers. The Global Banking and Markets division provides debt and risk management to corporate and institutional customers in markets around the world. Key subsidiaries include:

RBS Insurance

RBS Insurance is the second largest general insurance provider in the UK, as well as a growing presence in Spain, Italy, and Germany. Key brands include:

Churchill Insurance also underwrites: Lloyds TSB, Nationwide, Prudential, Pearl, Help the Aged and Alliance & Leicester Car Insurance brands
Direct Line also underwrites : Privilege (Privilege Direct, consumer side of the business)
UK Insurance also underwrites : Tesco, Privilege Fleet, Egg, Mint, Mini, BMW, Peugeot, Suzuki, Vauxhall, NatWest, RBS Royalties, etc

Ulster Bank Group

Ulster Bank Group provides personal and business banking services in Northern Ireland and the Republic of Ireland under the Ulster Bank and First Active brands.

Citizens

This division includes the Bank's businesses in the United States, Citizens Financial Group and Charter One Bank.

Manufacturing

This 'invisible' 8th division provides centralised back-office services for much of RBS Group, ranging from Cash/Coin Management, Call Centres, to Desktop Support and general IT for the more visible banking & insurance brands like Royal Bank, Direct Line, NatWest, etc.

Controversy

Fossil fuel financing

It is claimed by several pressure groups that the Royal Bank of Scotland is one of the world's primary financiers of oil and gas extraction projects.[22] They further allege that RBS is “opening the oil and gas frontier” by funding oil and gas extraction in politically and environmentally sensitive regions and entrenching our dependence on oil and gas.[22] This has led to campaigns against this activity.[23] Protests have taken place at some RBS and Natwest branches in the UK, with a number of student unions threatening to join a boycott against the bank after its 2009 annual general meeting.[24][25][26] The NUS (who banks with Natwest) has also expressed concern over this issue. [27]

RBS also provides the financial means for companies to build coal-fired power stations and dig new coal mines at sites all over the world. RBS is accused of helping to provide an estimated £8bn over the last two years to energy corporation E.ON, and other companies utilising coal [28].

Bank of China and Burma

The bank's 10% stake in Bank of China has led to accusations of investing in the Government of Burma.[29] The Group has defended its position by saying, "Bank of China is a highly respected international financial institution...it sets out its policies in its published accounts and we are happy with these policies and the way in which they are applied." [29]

Huntingdon Life Sciences

In 2000 and 2001, the bank was the target of threats of violence over its provision of banking facilities for the animal testing company Huntingdon Life Sciences. The action resulted in RBS withdrawing the company's overdraft facility, causing the company to obtain alternative funding on a tight deadline.[30][31]

Sakhalin II

On January 17, 2008 environmental groups wrote to Goodwin to urge him to exercise his leadership to resolve environmental problems associated with the ABN AMRO-financed Sakhalin II project (RBS, Fortis and Banco Santander acquired ABN AMRO in 2007). In a responce from a subordinate, RBS refused to comment on the specific Sakhalin II allegations.[32]

Corporate jet

In June 2004, RBS admitted that it owned a Dassault Falcon 900 jet worth £17.5m for the use of Goodwin and the board, a fact not disclosed in the annual report. Based in Paris for maintenance and tax purposes, the jet is also leased to the bank's clients via Lombard[33].

Banknotes

The group's pound sterling banknote issues are in wide circulation in Scotland and Northern Ireland. In Scotland, Royal Bank of Scotland banknotes include the UK's last £1 note. Ulster Bank is one of four issuers of Northern Ireland banknotes, though, like other private sector banks, it does not issue notes in the Republic of Ireland, where the official currency is the euro.

References

  1. ^ CFG Factsheet.
  2. ^ A Brief History of The Royal Bank of Scotland Group.
  3. ^ The Scottish Gaelic name (Scottish Gaelic: Banca Rìoghail na h-Alba) is used by retail banking branches of the Royal Bank of Scotland plc in parts of Scotland, especially as signage and customer stationery.
  4. ^ Scotbanks.org - The Royal Bank of Scotland
  5. ^ DeCarlo, Scott (ed.) The World's 2,000 Largest Public Companies Forbes Magazine, Special Report, 29 March 2007
  6. ^ http://financialranks.com/?p=69
  7. ^ Competition Commission - The Hongkong and Shanghai Banking Corporation Standard Chartered Bank Limited The Royal Bank of Scotland Group Limited
  8. ^ BBC News | BUSINESS | NatWest takeover: a chronology
  9. ^ NatWest merger's mixed fortunes BBC News, 2000
  10. ^ BBC NEWS | Business | RBS leads $3.1bn China investment
  11. ^ Barclays boss: RBS overpaid for ABN Amro | Business | The Observer
  12. ^ a b Does RBS’s acquisition of ABN Amro really do what it says on the tin?
  13. ^ RBS okay for UK's biggest rights issue - CNN.com
  14. ^ BBC NEWS | Business | RBS sets out £12bn rights issue
  15. ^ Shares slide at RBS as worries grow | This is Money
  16. ^ news.bbc.co.uk, Brown: We'll be rock of stability
  17. ^ bloomberg.com, Stocks Rebound After Government Bank Bailout; Lloyds Gains
  18. ^ guardian.co.uk, Darling: UK taxpayer will benefit from banks rescue
  19. ^ afp.google.com, Britain to invest up to 37 billion pounds in ailing banks
  20. ^ OpesC
  21. ^ a b c RBS.com | About Us| Our History | Exhibition Feature | Building the Brand
  22. ^ a b "The Oil and Gas Bank" report
  23. ^ Sunday Herald | RBS is accused of sponsoring global warming
  24. ^ EUSA | Students pack-out George Square lecture theatre for Students’ Association AGM
  25. ^ LUU | Referendum Site
  26. ^ YUSU | Sustainable Banking
  27. ^ NUS banks with NatWest
  28. ^ Climate change: High street banks face consumer boycott over investment in coal projects
  29. ^ a b Sunday Herald | RBS "profits from Burma links"
  30. ^ Animal Rights news in the UK | Animal testing lab faces ruin as bank cancels overdraft
  31. ^ "Inside the labs where lives hang heavy in the balance". The Observer. 2001-1-21. Retrieved 2008-04-27. {{cite web}}: Check date values in: |date= (help)
  32. ^ http://www.banktrack.org/doc/File/dodgy%20deals/Sakhalin%20oil%20and%20gas%20project/080402._RBS2.JPG
  33. ^ http://www.telegraph.co.uk/finance/2882151/Revealed-Royal-Bank%27s-secret-jet.html

See also

Retrieved from "https://en.wikipedia.org/w/index.php?title=NatWest_Group&oldid=245243103"