London - Nine years after the beginning of a £45 billion (R756.34 billion) bailout by the British government, Royal Bank of Scotland is emerging from its restructuring process a shadow of what was once the biggest lender in the world.
RBS had a balance sheet of £2.4 trillion in 2008 - almost double Britain’s annual economic output at the time - having staged a meteoric rise from being a small Scottish lender in the early 1990s.
Since the bailout it has offloaded billions of pounds of assets a week as it tries to shrink down to being a simple UK-focused lender.
Later this year RBS will shut its Capital Resolution division, which has sold off large chunks of its huge stockpile of unwanted assets. The closure will mark a milestone in the bank’s road to recovery, with its balance sheet around £1.6trillion lighter than when its great sell-off began.
“For the first time in a long time there is a distinction between yesterday and tomorrow,” Mark Bailie, who runs the unit said at the lender’s ultra-modern glass-and-steel offices in London’s financial district.
RBS has undergone a huge asset sale, ranging from a fleet of aircraft in Beijing and the largest hospital in Sydney, to a golf course 110km from the nearest road in Florida, and a graveyard in the US Deep South.
The steep and ongoing asset-shedding, plus the deep staff and IT systems overhaul still to come, mean the future shape of RBS and its growth potential are still unknown propositions for investors, according to shareholders and analysts.
“I think it is not investable at the current time. There is just too much more work to be done,” said Julian Chillingworth, chief investment officer at Rathbone Brothers, which holds some RBS shares.
Read also: RBS chief leaves 'terrible legacy'
Britain’s government has ruled out reducing its stake in the bank until it resolves a multi-billion pound US fine for mis-selling toxic mortgage-backed securities and resolves its state aid requirements.
The bank’s relatively small size now and the cost of its nine-year overhaul is raising questions from politicians and industry experts over whether taxpayers - who already face a paper loss of £29bn on their investment - will see the kind of stellar RBS growth needed to retrieve all their cash.
Few in the banking sector or government believe rescuing and reducing RBS was the wrong decision, given the risks it posed to the wider financial system. A collapse could have triggered a run on every bank in Britain.
Still, RBS’s story illustrates the perils of bailouts at a time when state intervention is back in focus in Europe; while EU regulations have been tightened to make state bailouts a last resort, the Rome government is nonetheless seeking permission from European authorities to bail out debt-laden Monte dei Paschi di Siena and two smaller Italian banks.
An RBS spokesman directed queries on whether taxpayers would retrieve their money to comments by chief executive Ross McEwan who said last year it was possible the state wouldn't get its full investment back. A spokesman for the Treasury said any future sale of its stake is dependent on market conditions.