Royal bank of Scotland
Background information about the bank:
The Royal bank of Scotland was founded in 1727 in Scotland and started trading solely there from the Scottish capital for about half a century. First branch was successful so they expanded in Scotland by opening branches. Then in 1874, the first office opened in London.
In the 20th century, there was rapid expansion and there was domestic and overseas growth. They acquired several English banks like Williams Deacon's Bank, Glyn, Mills & Co and Drummonds Bank. Then in the 1950s their mobile banks began serving rural communities, and by 1960 their first office opened in New York. In 1969 they merged with National Commercial Bank of Scotland because they wanted to have a bigger market share in Scotland. They also introduced the daisy wheel brand mark which remains so central to their corporate identity.
Regarding their technology and diversification, they tried computerisation and introduced a new generation of multi-function cash dispensers in the 1970s. In the 1980s they launched Direct Line motor insurance and bought Citizens Financial Group in the USA. By the 1990s we were leading the technology of telephone and internet banking.
Then for their takeovers and acquisitions, in 2000, they acquired National Westminster Bank and this can be said to be the biggest takeover in banking ever in Britain and thus through this National Westminster Bank they have gotten more than 200 banks that had made up NatWest. Then in 2005 they formed a strategic partnership with Bank of China and in 2007, the biggest takeover in banking history, they led a unique consortium with Fortis, and Banco Santander to acquire the Dutch bank ABN AMRO. ABN AMBRO had been here in Singapore since 1858, so it means it makes RBS the oldest foreign bank here today.
Why they wanted to take over ABN amro
The consortium led by RBS that bought over ABN amro for 70 billion euros includes Fortis and Banco Santander and they agreed to carve up ABN AMRO's assets around the world because they felt that stating that the current stock price didn't reflect the true value of the underlying assets of ABN amro. RBS paid about 10 billion pounds for its portion, mainly investment banking business and and its Asian operations because they believe that it would do them good and become the world's fifth largest banking group. Although it is like a challenge through the recent market downturn, they are hoping that they will recover within three to five years from the integration of ABN Amro assets which were responsible in damaging the bank's balance sheet. They also aimed to create a leading retail, corporate and institutional bank in Asia.
Problems they are facing currently
They have suffered a few setbacks.
During 2008's credit crisis, they had the biggest loss in UK banking history after taking a hit of almost £6 billion from the credit crisis. Even so, they were expected to be losing more aftermath and in 2009, they reported to have the largest annual loss in UK corporate history. RBS announced that its 2008 loss totalled £24.1bn ($34.2bn), the largest in UK corporate history. The purchase of the Dutch bank ABN Amro had already cost them £16.2bn.
RBS also came under fire after it emerged its former boss Sir Fred Goodwin was already drawing a pension of £650,000 a year.
Due to the global economic downturn, The Royal Bank of Scotland announced that it would halve its funding of British sport in 2009 which also weakened their commercial advertising for themselves.
STEPS TAKEN TO COUNTER THE RECESSION.
Even after they lost so much money, they still wanted to inject £325 billion into raising the ownership of the the Britain's stake to 95 percent since it was initially only 70 percent owned by the government. This move was to be insured for any further loses.
In June 2008 RBS sold the subsidiary Angel Trains for £3.6 billion as part of a £10 billion assets sale to raise cash.
In late October 2008 it was reported that the insurance company Swiss Re and venture-capital firm CVC Capital Partners were to purchase the insurance division for a reported £6 billion which would reduce some of the funds needed from the Treasury.
They also had a tax avoidance department, which had helped it avoid £500m of tax by channelling billions of pounds through securitized assets in tax havens such as the Cayman Islands.
In September 2009, RBS and Natwest announced dramatic cuts in their overdraft fees. The unpaid item fee was reduced to £5 from £38 and the card misuse fee was reduced from £35 to £15. Meanwhile, the monthly maintenance charge for going overdrawn without consent is down from £28 to £20. The fees are estimated to earn current account providers about £2.6bn a year. This is a step in the right direction and a victory for consumer pressure.
They also have a planning and foresight,
We should again become one of the world's premier financial institutions, anchored in the UK but serving institutional customers here and globally, and doing it well.
We will achieve this by:
- Focusing our activities on serving enduring customer franchises, with top tier competitive positions where we choose to compete.
- Targeting 15%+ return on equity in our business.
- Achieving primarily organic growth at rates consistent with the markets in which our businesses operate.
- Using proportionately our balance sheet, funding and risk.
- Having businesses that reinforce each other with shared products, customers and expertise.
Our approach will entail:
- A purposeful management style.
- “Making it happen” for our customers and then for our shareholders.
- A strategic understanding of our businesses and a focus on long-term quality profitability.
- A business mix more biased than before to stable customer businesses.
- Aiming to rely less on volatile, unsecured wholesale funding.
We have embarked on a sweeping restructuring of the Group.