On Monday, shares of
The Royal Bank of Scotland Group plc
) dipped 2.32% to close at $11.38, following rumors of sale of the
bank's international arm of Coutts wealth management unit. The news
was first reported by
The Royal Bank of Scotland is expected to vend the international
operations of Coutts, though it would hold back the UK part of
Coutts. The latest move of the state-controlled bank comes on the
heels of its plan to refocus on its domestic operations by reducing
global and investment banking activities. Notably, it has been
rumored that RBS plans to offload Citizens Bank in the US later
this year and might vend Ulster Bank in Ireland.
Royal Bank of Scotland is anticipated to vend, merge or enter into
a joint venture for Coutts International for about £500 million.
The bank is skeptical about its strategic plan of achieving more
than 15% return on equity as profit margins are reducing and the
international business is gradually becoming costly.
More than 100 Swiss private banks are under probe by the regulators
over doubt surrounding illegal activities related to tax evasion.
Zurich-based Coutts is also under the same purview and is expected
to reach a settlement in the next few months. However, the Royal
Bank of Scotland might enter into a deal to sell Coutts but will be
liable to pay penalty. Notably, around two years ago, Coutts paid
£8.75 million as fine for money-laundering offences.
Coutts International with 1,200 employees posted £67 million of
operating profit in 2013. The unit comprises about 41% of customer
assets and liabilities and 35% of RBS' wealth unit revenues.
The latest move is in compliance with the regulatory demands that
require this 81% government owned bank to focus more on core
domestic retail and commercial banking business and trim down its
investment banking business that has high risk exposures. Royal
Bank of Scotland is now expected to put emphasis on three major
groups that comprise - retail customers, small enterprises and
large business houses in the UK.
The bank, which was bailed out with £45 billion by the government
during the financial crisis, is striving for growth with cost
reduction initiatives, increased focus on markets where it has a
strong presence and long-term growth prospects and improving its
Notably, as part of its restructuring activities, Royal Bank of
Scotland is set to eliminate a minimum of 30,000 employees in its
investment banking division and international operations in the
coming three to five years. The figure represents 1/4th of its
At a time when the Royal Bank of Scotland is burdened with numerous
litigations, we remain encouraged by its restructuring initiatives
as these will pave the way for sustainability and growth in the
long run. Currently, Royal Bank of Scotland carries a Zacks Rank #3
(Hold). Some better-ranked foreign banks include BBVA Banco
), Banco Macro S.A. (
) and Shinhan Financial Group Company Limited (
). All three carry a Zacks Rank #1 (Strong Buy).
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