LONDON (AP) — Taxpayer-backed Royal Bank of Scotland announced Thursday it would cut 3,500 jobs, part of a reorganization of its investment banking arm as it reins in its ambitions to be a global financial player.
The cuts, which are to be phased in over three years, will largely affect employees in Global Banking and Markets, which had offered advice on mergers and acquisitions. The division has 18,900 employees overall.
“Our goal from these changes is to be more focused for customers, more conservatively funded, more efficient and with better, more stable returns for shareholders overall,” Chief Executive Stephen Hester said in a statement.
The bank has been under pressure to pull back from its expansion goals. The strategy also dovetails with British government efforts to force banks to separate their retail operations from their more volatile investment banking.
Under former chief Fred Goodwin, RBS led a takeover of Dutch bank ABN Amro in 2007, only to run into huge problems in 2008, when the global financial crisis caused a severe credit crunch. The group collapsed in 2008 and taxpayers had to bail it out. It is now 83 percent owned by the taxpayer.
Write-offs on the ABN deal helped swell the bank’s losses in 2008 to 24.3 billion pounds, a U.K. record.
The monumental losses put Goodwin — nicknamed “Fred the Shred” for his vigorous cost-cutting at RBS — under intense scrutiny. He left RBS with a pension of 703,000 pounds ($1.1 million) per year after leading the expansion spree, though he later negotiated an agreement to take a lump sum payment of 2.8 million and scaled back his pension payments.
The latest cuts are in addition to the 2,000 losses announced by the bank last summer. The fresh losses mean 11,000 posts have been cut at the division from the pre-banking crisis headcount of 24,000. RBS said it will now exit from the mergers and acquisitions.
“This strategy has succeeded in making RBS stronger and placing us on the road to long-term success,” Hester said.
The job losses come amid reports that John Hourican, who will continue to oversee the restructuring of the business, is in line to pick up 4 million pounds ($6.1 million) in long-term incentive shares awarded in 2009.
Union representatives sharply criticized the cuts.
“It is a disgrace that while on a daily basis stories are emerging about the massive bonuses at the top of the bank, increasing numbers of jobs are being cut from amongst the hard-working staff,” said David Fleming, a Unite national officer.