Of Special Interest

6th January 2012

RBS investment banking downsizing

Royal Bank of Scotland was ordered last month to look more radically at downsizing its investment banking operations by the government, owner of 83% of the bank's equity. It became clear that the investment banking unit was not moving into profit as fast as had been expected and in the current environment this was unlikely to change. The unit employs around 10,000 in total.

The review is understood to be progressing rapidly under a multi-stream approach with multiple options under consideration. McKinsey is helping advise with Lazard responsible for the sales of any units. Organisations interested in bidding for parts of the investment bank are asked to provide indicative bids by the month end. The bank will resist providing any detailed announcements before 23rd February, the day it is scheduled to provide its 2011 results.

Favourite candidates for selling are its corporate finance unit, Hoare Govett and its wider equity business. The latter two are favoured because they work quasi-autonomously and would be simple to disentangle. Corporate Finance, dealing with the bigger and more complex finance cases could be considered for sale because it is considered higher risk. The complexities may make it harder to disentangle and to get a good price for in the current market.