RBS' Digitization Move to Result in Another Round of Layoffs

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Per a Bloomberg article, The Royal Bank of Scotland Group plc 's RBS Chief Financial Officer, Ewen Stevenson, recently hinted at cutting jobs in order to cope with changing customer preference to digital modes of banking.

The era of digitization has led the banks shut down their branches as people hardly turn up and thus utilize the costs saved in expansion of core businesses.

While interviewing with Bloomberg Television, Stevenson sounded optimistic about the bank's strategy to invest in technology, which he foresees as creating "a better bank in 2020, a better bank equipped for digitization". He also said, "It's inevitable that there will be further job cuts, but we are not going to talk publicly about figures."

Since its bailout in 2008, Royal Bank of Scotland reported full year of profit for the first time last week, reflecting its successful efforts in providing a turnaround. Also, the bank disclosed plans to incur £2.5 billion as restructuring charges in 2018-2019 cumulatively. The restructuring would include disposal of properties and data centers.

Impact of Digitization on Other Foreign Banks

London-based, Lloyds Banking Group plc LYG made plans to close 49 branches in late 2017, in sync with the changing consumer preferences and as part of its efforts to move toward digitization. The move is likely to result in nearly 100 job cuts.

In October 2017, UBS Group AG UBS signaled that the company could lay off close to 30,000 workers in the years to come. The workforce reduction would be primarily attributable to its technological advancement.

Our Viewpoint

Royal Bank of Scotland is committed to improving its financial health. In 2017, the bank had closed many branches in order to accommodate changing customer preferences to digitization. Also, the bank remains on track to deliver the strategic targets it plans to achieve by 2020.

However, the bank is likely to be hit significantly by a settlement it might enter soon with the U.S. Department of Justice over mis-selling of mortgage-securities. Also, uncertainty over Brexit remains a headwind.

Shares of Royal Bank of Scotland have gained 24.2% over the past year, outperforming 13.3% growth recorded by the industry .

The stock carries a Zacks Rank #3 (Hold).

A better-ranked stock from the same space is HSBC Holdings plc HSBC . The company witnessed an upward earnings estimate revision of 4.2% for 2018, over the last 60 days. Also, its share price has increased 3.9% in the past six months. The stock is carrying Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

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UBS Group AG (UBS): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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