Royal Bank of Scotland does not expect to get back the £15 billion in capital it has sunk into Ulster Bank since the financial crash in late 2008, while it could be up to a decade before it repays its £46 billion bailout funds to UK taxpayers, RBS chief executive Ross McEwan has told The Irish Times.
In an interview in Business This Week, Mr McEwan accepted that RBS was unlikely to get back the rescue cash it provided to Ulster Bank.
“No, I don’t think we will,” he said. “We should say that was part of the price of us actually having to save the business. But it also showed our commitment to Ireland, both Northern Ireland and the Republic of Ireland . . . and that we stood behind our businesses.”
Benefit of hindsight
Mr McEwan said the bailout capital was the result of “strategic moves 10 years ago that in hindsight weren’t the best of things to do”.
Earlier this year, RBS committed to Ulster Bank following a strategic review Mr McEwan said considered a sale, mergers and external capital.
“The answer after five months of pretty extensive work was that this was a business that we should hold on to ourselves,” he said. “We’ve got a good position here as the number three in the market. We believe we can be a very good bank for the Republic and get a return in . . . the next four to five years.”
What return is required?
“In the medium to long term, you’d want to see it around the 10-12 per cent return on equity. From a bank of this shape, that’s what you’d expect. It has some things that are dragging it down at the moment . . . so we think an appropriate timeframe is four to five years to get to that level.”
RBS is 81 per cent owned by British taxpayers following a £46 billion bailout in 2008 and 2009. Mr McEwan said it could be up to a decade before this money is returned.
“They will get that back when we as a team have created a really good bank,” he said. “If you have a look at the things we need to do over the next 12-24 months, you’ll find this bank in quite a different position. You will see the share price move up because of the value that’s being created.
“I think the government will take its time to start getting itself out. The thing you have to remember is it’s £46 billion. The market will only absorb so much per year. If you think the market only takes £5 billion, maximum £10 billion a year, it could take some time.”
Mr McEwan (57) said he would like some taxpayer funds to be repaid on his watch.
Government’s hands
“Yeah, I certainly would. It would be good to be part of the reprivatisation of RBS. At the appropriate time. We shouldn’t be rushing to do it but it’s in the government’s hands.”
Mr McEwan declined to comment on whether he would receive a bonus in 2015, having waived his right to one in the past two years.
“It should not be the big issue that everyone focuses on,” the Kiwi banker said.
“The big issue should be are we turning this bank around. People should be paid for the job they do. If they do a great job they should be paid for it. I’m here to turn this bank around and that’s what I’m doing.”
A decision on his bonus is likely in February, he added.
