Kiwi McEwan plans bold reforms at Bank of Scotland

The Royal Bank of Scotland boss's kiwi boss Ross McEwan is planning on dismantling large parts of the bank put together by his predecessor Fred Goodwin.

The Royal Bank of Scotland boss's kiwi boss Ross McEwan all but tore up the remainder of his predecessor Fred Goodwin's legacy at Royal Bank of Scotland yesterday, with plans to dismantle large parts of the bank put together by the former RBS chief executive.

McEwan, 57, a Massey University graduate from Hamilton, said the bank, which reported its seventh straight year of losses, would call time on investment banking in 25 countries, saying they would never be profitable enough to justify the capital needed to keep them running.

Before heading to the UK, McEwan was one of the youngest chief executives in New Zealand.

He ran local operations of French insurance company Axa and held personnel-type positions at Unilever, Dunlop and National Mutual.

But markets took a dim view of the plans and the numbers, with the shares falling sharply on the day, making RBS by a distance the worst performer among the big four banks on the London Stock Exchange.

Ian Gordon, an analyst at Investec, reaffirmed his "sell" rating and said he expected little more than a breakeven performance in 2015.

The upshot of McEwan's plans will be thousands of job losses in an investment banking operation that employs 16,000 people globally but will remain active in just 13 countries when the programme is complete. McEwan has not said exactly how many of those jobs will go.

The losses, of £3.5bn, were an improvement on the £9bn recorded in 2013 and largely due to one-offs such as a £4bn write-down related to the sell-off of its US arm Citizens.

But Goodwin's legacy continues to haunt the bank, which faced £2.2bn in fines and payouts to consumers over issues such as PPI mis-selling.

McEwan, who has given up a £1m share allowance for 2014, said that despite its historic problems, RBS made a £3.5bn operating profit, against a loss of £7.5bn in 2013.

In giving up the allowance, McEwan said in a statement to the BBC that he didn't want the allowance "to be a distraction from the task of building a great bank".

His pay this year for 2015 is expected to top £2.7m even after turning down the share award.

He also floated the prospect of a resumption of dividend payments in 2016, although he will have to secure the approval of the Bank of England's Prudential Regulation Authority, which has been grappling with the same issue at Lloyds this year.

"By the time we get to 2016, we will have met the preconditions for paying a dividend and start having the discussion with the Prudential Regulation Authority," he said.

RBS also confirmed that Sir Howard Davies will take over from Sir Philip Hampton as chairman.

The bank is set to sell a portfolio of $36.5bn (£5bn) worth of American and Canadian loans to Japan's Mizuho Bank.

The deal will realise a loss of £200m, but it will cut risk-weighted assets in the investment bank by around £5bn - out of the £25bn in reductions targeted for his year and £60bn by 2019.

McEwan wants most of RBS's operations to be held within the retail ring-fence created by the Independent Commission on Banking to protect depositors and small businesses from the risky activities carried out by investment banks.

- THE INDEPENDENT