Global woes may drive Royal Bank job cuts up to 5,000

UP TO 5,000 jobs could be lost at Royal Bank of Scotland as part of a major restructuring of its global investment banking operation.

The bank announced at the time of its half-year results in August that some 2,000 roles were under threat as it completed the integration of ABN Amro, the doomed acquisition that saw RBS run out of cash and seek a taxpayer bail-out in 2008.

However, sources say that due to a further deterioration in market conditions over recent weeks and the bleak outlook for the eurozone, the final jobs toll is likely to be much higher, with one report yesterday estimating the figure closer to 5,000.

RBS last night declined to comment, but one banking source said: “Times are difficult; there will be redundancies, but whether they are on that scale or not I don’t know.”

The taxpayer-backed institution has launched a review into its global banking and markets division and there are expectations that chief executive Chief executive Stephen Hester could swing the axe over some of its European outposts in favour of concentrating on the UK and US markets.

RBS slumped to a half-year loss of £794 million earlier this year due to its exposure to the troubled Greek economy, plus a £850m provision to cover compensation for the mis-selling of payment protection insurance.

But recent stock market turmoil, a dearth of major corporate deals and an increasing regulatory burden have heaped pressure on banks in recent months.

This is expected to be reflected in a bruising set of results from Wall Street giant Goldman Sachs this week, where revenues for the third quarter are forecast to have fallen by about half to $4.93 billion (£3.1bn) compared to the previous three months.

RBS has already significantly scaled back its investment banking operation since the financial crisis, withdrawing from 12 countries. It is expected that Hester’s latest review will be influenced by the final outcome of regulatory reforms, including the recent recommendations by the Independent Commission on Banking.

The ABN Amro deal and the brutal regime instilled by former RBS boss Sir Fred Goodwin prior to the bank’s near collapse will come into sharp focus tonight in a BBC documentary.

Cameron McPhail, who was chief executive of the bank’s wealth management operation during the early years of Goodwin’s reign, says of the bank’s demise: “It didn’t have to happen this way. We didn’t have to try and become the biggest bank in the globe. If we had been a little more prudent, we could have avoided the storm.”

l RBS: Inside The Bank That Ran Out of Money, BBC1 Scotland, tonight at 9pm.

l NBNK, the bank acquisitions vehicle set up by Lord Levene, is to join the bidding for state-owned Northern Rock, sources said at the weekend.

If successful, it is believed that the firm would seek to combine Northern Rock with the 632 Lloyds Banking Group branches up for auction to create a powerful competitor to the existing “big four” high street banks.

As reported by Scotland on Sunday, a sale of the Lloyds branches now appears inevitable as, privately, the bank has ditched plans for a flotation of the branch business – an option that had been talked up as an alternative to an auction.