This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

The Deal: RBS Confirms Creation of Internal 'Bad Bank'

LONDON ( The Deal) -- Royal Bank of Scotland's (RBS - Get Report) newly installed CEO Ross McEwan Friday, Nov. 1, put his own -- albeit government-brokered -- mark on the institution's long-running restructuring, accelerating the divestment of RBS Citizens Financial Group, putting toxic assets into an internal "bad bank" and announcing a new review to shave costs.

McEwan announced the reorganization at the 81% state-owned bank after the U.K. government decided following a review led by Rothschild and BlackRock that hiving off Royal Bank of Scotland's risky assets into an external "bad bank" wasn't worth the effort or the risk.

McEwan's overhaul comes almost five years after predecessor Stephen Hester began a comprehensive revamp of the institution, which received 45.5 billion pounds ($72.9 billion) of state rescue funding in the fall of 2008. Hester was ousted as CEO earlier this year amid political and regulatory pressure for an even more far-reaching reorganization and amid continued criticism Royal Bank wasn't lending enough to small businesses.

"We now have a shared vision for the bank that includes the board, our principal prudential regulator and the U.K. Government," said McEwan in a statement. "I believe this is beneficial for all of our shareholders. The actions we are announcing today, when complete, will create a less complex, more effective customer business capable of delivering returns that will be attractive to prospective shareholders. They will create a bank that can reward the faith of U.K. taxpayers and all our investors."

McEwan, who took the helm in September, said Royal Bank will fully divest Providence, R.I.-based Citizens by the end of 2016 and hold an IPO for the business next year, instead of 2015, as originally planned.

The internal "bad bank" will include 38 billion pounds of high-risk assets, among them bad loans from the lender's struggling Ulster Bank unit. Royal Bank wants to run down or sell between 55% and 70% of the assets over the next two years.

The reorganization will lead to between 4 billion pounds and 4.5 billion pounds in write-downs in the fourth quarter and reduce Royal Bank's core Tier One capital ratio by 10 basis points in the short term, Royal Bank said.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
RBS $10.09 -2.04%
AAPL $124.43 -1.54%
FB $82.22 -1.18%
GOOG $548.00 -0.73%
TSLA $188.77 -0.94%

Markets

DOW 17,776.12 -200.19 -1.11%
S&P 500 2,067.89 -18.35 -0.88%
NASDAQ 4,900.8850 -46.5560 -0.94%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs