• Stephen Hester says the privatisation is getting closer
• £607m paid out in bonuses, £215m to investment bankers
• £450m extra charge from PPI scandal
• Plans to spin off part of US arm Citizens
Royal Bank of Scotland declared on Thursday it was on track for a partial privatisation next year but sparked a fresh row over bonuses at the scandal-hit institution.
The bank posted an annual loss of more than £5bn and Stephen Hester, its chief executive, admitted 2012 had been a “chastening” year after its £390m Libor rigging fine. Its total losses since the 2008 bailout have now topped £34bn. However, the bank is still paying out £607m in bonuses in the coming weeks.
The shares were among the biggest fallers on the stock market, losing more than 6% to 323p – which amounts to a near £15bn loss on the taxpayer’s 82% stake.
Hester, however, said “the light at the end of the tunnel” toward privatisation was “coming much closer” while Sir Philip Hampton, RBS’s chairman, hoped the bank would start to pay a “token” dividendto shareholders – the first since the banking crisis – “as soon as possible”. He said: “Our objective is to give the government options to sell its stake as soon as possible and it would be very good if we could make that ‘as soon as possible’ 2014.”
A government spokesman insisted that “there is no timetable for a disposal” although ideas for a free distribution of shares to 46m voters had been floated as recently as a fortnight ago.
George Osborne claimed credit for the decision by RBS to “accelerate” its focus on UK retail and corporate banking. It announced further streamlining of the investment bank and a plan to spin off part of its US operation, known as Citizens, in two years. Hester described UK Financial Investments, which looks after the stakes in the bailed-out banks, as becoming “more activist in trying to present its views”.
Asked what form any share sale would take, Hampton said he expected taxpayers to be able to “participate in the availability of shares” although he warned about the number of football stadiums that would be needed for shareholder meetings.
Hester said the privatisation of RBS would be a “seminal” moment, appearing to indicate that he intended to stay on to see the task through.
Despite the loss, RBS has paid out £607m in bonuses, £215m of which went to its investment bankers whose division was behind the Libor scandal. The bank, which said bonuses would have been £500m higher without the Libor fine, risked inflaming the row over City pay further by indicating that its annual report in March could disclose how many of its staff take home more than £1m.
Labour Treasury spokesman Chris Leslie said: “We need radical change in the culture of our banks and that must include reining in bloated bonuses, which are a device for keeping traders focused on the weeks ahead, rather than years ahead.”
Ian Gordon, analyst at Investec, said that RBS was “starting 2013 in a weaker financial position than the market had anticipated”. The bank insisted it would meet international targets for capital before the deadline in 2019.
Hester stressed that the bank’s assets had been reduced by £906bn since their peak in 2008 but acknowledged the cost of the payment protection insurance scandal, for which the bank took a further £450m charge to take the total cost to £2.2bn, and the interest rate swap mis-selling scandal had required a further £650m charge. The computer meltdown in June cost £175m.
He said: “2012 saw landmark achievements for RBS. It was also a chastening year. Along with the rest of the banking industry we faced significant reputational challenges as we worked with regulators to put right past mistakes.”
Osborne, who this week rejected calls for RBS to be fully nationalised, said: “I have been very clear that I want to see RBS as a British-based bank, focused on serving British businesses and consumers, with a smaller international investment bank to support that activity rather than to rival it.”
The chancellor added: “The government’s strategy is for RBS be a stronger and safer bank, which in time can be returned to full private ownership.” But he did not give any clues as to his preferred route for when a share sell-off can begin.
Hester acknowledged the influence of the government and also the regulators which have been conducting a review of bank capital. There had been an “important accommodation” over the bank’s capital, Hester said.
“The two revisions to our strategy that go with that are a further shrinkage of our markets business, with the capital there coming down significantly further over the next couple of years” and the intention to start selling Citizens.
On bonuses, Hester said that while the figure looked a “big number”, it was below the £1.8bn being paid out at Barclays and sums handed out by rivals UBS and Deutsche Bank.
RBS was forced to sell off its insurance business Direct Line by Brussels in return for the taxpayer bailout in 2008 and spun off a third of the operation last year, for which it has already been forced to take a goodwill writedown of £394m.
• This story was amended on Thursday 28 February to correct the figures for the amount being paid in bonuses
Stephen Hester’s £6m bonuses, on top of £1.1m salary, not all paid as MPs told of ‘reprehensible’ failings over Libor scandal
The chairman of the Royal Bank of Scotland on Monday described the pay of the bailed out bank’s chief executive Stephen Hester as “modest”, amid fresh scrutiny of bonuses in the wake of the £390m Libor fine.
Sir Philip Hampton said Hester – who can get up to £6m a year from bonuses on top of his £1.1m salary – was paid “well below the market rate of people working in banking” because his bonuses had not paid out in full. He was speaking during a lengthy session of the banking standards commission in Westminster, in which a senior RBS colleague admitted the bank had believed Libor rigging was “a mathematical impossibility”.
The evidence was called after RBS was fined £390m last week for rigging Libor, the interbank lending rate, and announced the departure of the head of its investment bank, John Hourican. Hourican told the commission that he was leaving in order to shoulder “ultimate responsibility” for the manipulation of the benchmark rate.
Hourican explained the bank had not been focused on Libor in 2008, at the height of the credit crunch, because “when we took control of the bank it had had a cardiac arrest”.
He added: “We had to prioritise dealing with the existential threat to the bank.” He urged those who are staying to change the culture, saying: “I have told people who are prepared to listen that they shouldn’t waste my death.”
Hampton, defending bonuses for Hester, conceded the chief executive had a “highly paid job” but that “his pay has been modest relatively”. He had received just one bonus since joining in 2008, of £2m, which has yet to be paid out. Some £780,000 of that will pay out in shares next month. Hester defended his pay, saying the nation was now “off the hook” for a lot of “bad things” of the past.
“My bonus should be assessed on all the things I do well and badly and judgment should be reached in the round,” said Hester. Hampton described Hester as having one of the most difficult and demanding jobs in banking. “He has also in his four years been paid well below the market rate for a job in world banking,” said Hampton.
Evidence was also taken from Johnny Cameron, the former head of RBS’s investment bank, who left after the bailout and has agreed with the Financial Services Authority not to hold a senior banking job again.
Andrew Tyrie, the conservative MP who chairs the commission, described Hourican “as a human shield” for others including his deputy, Peter Nielsen. Hourican said the bank was better served by Hester and Nielsen remaining in their roles.
Nielsen admitted that there were problems with the Japanese yen and Swiss franc Libor rates but that leading currencies such as sterling were not affected. “Senior management felt it was almost a mathematical impossibility” to affect Libor, Nielsen said.
He conceded that the bank had been too slow to respond to concerns about Libor and said the first two years after the bailout had been spent trying to save the bank. The Libor rigging took place between June 2006 and March 2010. Hourican admitted that it was “reprehensible” that Libor rigging had continued after the £45bn taxpayer bailout.
Tyrie expressed doubt about the bank’s claim that it would recoup £300m of the fine from bonuses.
“We were not given sufficient confidence today that the arrangement for funding the fines from bonuses will do what it says on the tin,” said Tyrie. The commission’s chair wants RBS to show what bonuses would have been paid without the fine.
Posted by admin | Posted on 07-02-2013
Category : Business
Tags: banking, boss, diamond, employee, fed, inquiry, june, libor, royal bank of scotland, serious fraud office, setting, traders
How the benchmark rate fixing unfolded
The Libor interest-rate scandal dates back to 2005. Little known outside the City, it underpinned trillions of pounds worth of loans, mortgages and financial contracts in Europe and the US.
Regulators have already imposed £1.7bn of fines on a string of the world’s biggest banks, while police are pursuing criminal investigations into staff involved in rigging the rates to suit their employers.
2005
Between January 2005 and June 2009, Barclays derivatives traders made a total of 257 requests to fix Libor and Euribor rates. Initially, traders sought to inflate the bank lending rate to boost profits – and their own bonuses.
2007
After Northern Rock collapses, Barclays submits artificially low rates to give a healthier picture of its ability to raise funds.
In a phone call in December, a Barclays employee tells the New York Fed that the Libor rate was being fixed at a level that was unrealistically low.
2008
In April the New York Fed queries a Barclays employee over Libor reporting.
The Wall Street Journal publishes the first article questioning the integrity of Libor.
Following the WSJ report, Barclays is contacted by the British Bankers’ Association over concerns about the accuracy of its Libor submissions.
Later in the year, the Fed meets to begin inquiry. Fed boss Tim Geithner gives Bank of England governor Sir Mervyn King a note listing proposals to tackle Libor problems.
2009
A year on, the BBA issues guidelines for setting Libor rates.
2010
In June, Barclays makes first effort to clamp down on Libor manipulation in email setting out standards of behaviour.
2011
Royal Bank of Scotland sacks four people for their alleged roles in the emerging Libor-fixing scandal.
2012
22 June Barclays chief executive Bob Diamond learns of emails sent by dodgy traders. He later says reading them made him feel “physically ill”.
27 June Barclays admits misconduct. Regulators fine it £360m.
29 June Diamond insists he will not resign.
July Barclays chairman Marcus Agius and Diamond resign, followed by chief operating officer Jerry del Missier.
The prime minister, David Cameron, announces a review of the banking sector, sets up Banking Commission. Serious Fraud Office (SFO) launches a criminal inquiry into Libor manipulation.
Deutsche Bank confirms that a “limited number” of staff were involved in the Libor rate-rigging scandal. It clears senior management. SFO arrests three men in connection with investigations into Libor.
Swiss bank UBS is fined £940m by US, UK and Swiss regulators.
2013
January Barclays’ new boss, Antony Jenkins, tells staff to sign up to a new code of conduct – or leave the firm – in clean-up operation.
February RBS is fined £390m by
Posted by admin | Posted on 13-12-2012
Category : Business
Tags: banking, buying, city, frederick, guardian.co.uk, huth, london, market, meinertzhagen, obituaries, partner, royal bank of scotland, stock, stock markets, stockbrokers
One of the most successful and influential stockbrokers in the City of London
Peter Meinertzhagen, one of the City of London’s most successful and revered stockbrokers, who has died suddenly aged 66, liked to pick winners. Stocks and shares, horses, ideas, people, clients – what mattered to him was pitting his wits and coming out on top.
He started his career in the lowly position of postroom clerk in a stockbroking firm in the City, but it was clear from the outset that he would soon rise to greater heights. One reason was his impeccable City pedigree. His father, Daniel, was chairman of the blue-blooded Lazard Bros merchant bank. His uncle Luke was senior partner of Cazenove, the City’s most elite and powerful stockbroking business. Further back, the Meinertzhagens had been merchants in Germany before buying a City merchant bank, Frederick Huth & Co, and moving to London in the 1800s. Peter, born in London, was sent first to Eton and then to the Sorbonne in Paris – hardly the usual background for a post room clerk.
But it was not simply his connections that set Meinertzhagen on the path that made him one of the most influential corporate advisers in London, it was also his intelligence and his personality. Meinertzhagen had the gift of making others feel valued – and also feel that he could, above all, be trusted. For him, a successful outcome for his clients, which included many of Britain’s top 100 companies, was always more important than securing additional fees for his firm.
He could appear opinionated, compelled to give his honest view even if it went against the grain and was unpopular. But his view was inevitably delivered with charm and a twinkle in the eye. He was not afraid to say “no” when a client proposed a course of action or a deal that he considered against their own interests. His warmth and enthusiasm gave him significant powers of persuasion.
At the daily “morning prayers”, meetings of clients with advisers when a deal was in progress, his enjoyment of the thrill of the chase could be infectious. His love of competition was equally evident when wooing potential new clients. He would wine them and dine them, take them shooting or to the races. Derby Day was an inviolate fixture in his calendar.
When he joined Hoare & Co in 1965, the City still operated on the basis that one’s word was one’s bond and deals sealed with a handshake were as solid as any written contract. This was a tradition with which he felt comfortable and one which, against the tide of changes brought to financial markets by the “big bang” of financial deregulation in 1986, he strove to maintain throughout his career. He regarded the changes as a necessary evil.
It is symptomatic of Meinertzhagen that he remained loyal to the firm that first employed him, and of which he became a partner in 1973. Over the years, the business went through a series of metamorphoses, first by merging with Govett, then by selling a stake to the California bank Security Pacific. Ownership later passed to the Dutch bank ABN Amro, itself taken over by Royal Bank of Scotland, after which Hoare Govett was sold to Jefferies & Co.
Twice he had to step in to stave off crises. The first time was in 1990, when long-time chairman Richard Westmacott suddenly quit. Meinertzhagen assumed the leadership role and remained chairman until 2004 when, after a serious illness, he eased back from the firm, remaining on the board. But the following year, he was playing golf when his mobile rang. His chosen successor, Nigel Mills, had been poached by Citigroup, the US investment bank. Worse, he was taking a team of other Hoare Govett executives with him, and more defections were rumoured. Meinertzhagen returned full-time as chairman and once more stablised the firm before retiring in 2007.
He never spiritually left the City, however, and in 2009 accepted the post as adviser to Oriel Securities, a partnership based on the more traditional values of impartial advice and integrity. It was an environment in which he felt comfortable and, two years ago, he joined the board as a non-executive director, but nevertheless became closely involved in the business, getting to know the staff and assisting the growth of Oriel’s client base. He was first on the dance floor at the office party, encouraging younger colleagues to join in.
A fully metropolitan man, Meinertzhagen lived in Chelsea and was to be seen at most of the glamorous events in town. He was equally at home, however, in the country, where he loved to shoot. He married Nikki Phillips in 1967. She survives him, along with four of their five daughters.
• Peter Richard Meinertzhagen, stockbroker, born 16 April 1946; died 28 November 2012
