Royal Bank of Scotland Group Plc plans to divide itself into a "good bank" and a "bad bank" and cut costs by more than 1 billion pounds ($1.44 billion) a year to help it recover from the biggest loss in British corporate history, The Sunday Times said, without citing anyone, Bloomberg reported.
The cost-reduction measures will result in about 20,000 job losses, with more than half in the U.K, the newspaper said. The Sunday Telegraph reported RBS, the largest government-controlled U.K. bank, will establish a "non-core" subsidiary which will hold 300 billion pounds of "unwanted assets."
"This is a very sensible solution and it will lead to a strengthening of the bank," said Howard Wheeldon, a senior strategist at BGC Partners in London. "We have to remember that there are some very good parts in Royal Bank which need to be able to prosper and thrive."
Chief Executive Officer Stephen Hester is trying to rescue the Edinburgh-based bank, which was crippled by the former head Fred Goodwin's 14.3 billion-euro ($18 billion) takeover of ABN Amro Holding NV's investment banking and Asian assets just three months before the credit crisis began.
RBS spokesman Neil Moorhouse declined to comment on the reports when contacted by Bloomberg News. The lender, which posted a record 28 billion-pound loss for 2008, is scheduled to publish a final earnings statement on Feb 26.
The measures, approved by the U.K. government, will result in the so-called bad bank being "ring-fenced from the rest of RBS," the Sunday Telegraph reported. The subsidiary will hold the Asian and Australian units acquired as part of the purchase of ABN Amro, RBS's aircraft leasing unit, and mortgage and lending assets of Charter One in the U.S., the newspaper said.
The Sunday Times also reported that at least 200 billion pounds of so-called toxic assets will be placed into the U.K. government's asset protection scheme.
RBS plans to separate out about 25 percent of its assets, including its Asia retail and commercial units, Australian operations and distressed investment-banking operations, to prepare for disposal within the next three to five years, the Wall Street Journal, citing a person familiar with the matter.
Labor union Unite said it will oppose compulsory redundancies at RBS and will meet with the bank tomorrow for talks on its strategic review. Unite is also seeking an "urgent meeting" with the government to discuss changes at U.K. banks where taxpayers have stakes, said in a PRNewswire statement late today.
RBS is considering plans to sell all or part of its Australian division along with other assets in Asia, three people familiar with the plan said last week.
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