Employees in RBS's investment banking unit have gone down in the world. Once they accounted for the bulk of group profits, as of today it seems that what remains of the investment bank accounts for just 11% of profits across the group. RBS's investment bankers and traders just aren't that important any more.
They've also got a new name (again). What was most recently known as 'RBS Markets and International Banking' is now to be known as 'Corporate and Institutional Banking.' RBS couldn't do a better job of messing with its investment bank's identity if it tried. "You mean the ex-markets division?", asked ex-retail banking RBS Group CEO Ross McEwan on the call this morning, when an analyst referred to the 'CIB,' suggesting that even he's not completely up with the new terminology.
Overall, RBS's results were good. McEwan has done well. Shares in the bank rose 14% this morning after it posted a surprise £1bn profit in the second quarter. If you work in RBS's investment bank (AKA Corporate and Institutional Banking), however, things look a little worrying.
The key worry is that in the three months ending June 2014, the cost-revenue ratio at the CIB was 107%. In other words, it made a loss. When restructuring and litigation costs are stripped out, the cost revenue ratio falls to 89%, but given that both restructuring and litigation costs aren't going to go away soon, this isn't exactly reassuring.
Subsidiary worries include the fact that McEwan is still busy restructuring the CIB into near non-existence. "We're examining every part of that business," he said on the call today. "We're conducting a full CIB review and looking at the risk-weighted assets." McEwan thinks that there are still parts of the CIB which don't make sense. There are still parts of the CIB that could be cut, therefore.
There's also the promise of big fines to come. Last week, McEwan said past wrongdoings in FX could lead to fines larger than those levied for LIBOR fixing. Today, McEwan reiterated that there are will be, "12-18 months of this stuff [fines] coming in." In other words, RBS bankers can't really expect to get paid this year.
Nor is RBS's non-core unit much of a place to hide out. The bank is doing a fine job of reducing its non-core assets and driving costs down. Assets in the non-core unit are expected to be £15bn to £18bn by the end of this year, down from £29bn when it all started. The cost of running the non-core unit is also being hammered down, from £4bn to around £2.5bn suggesting the services of non-core bankers are no longer required. Much the same is in evidence at Deutsche Bank. We've said before that jobs in non-core units are only really for the desperate. What can be said of jobs at RBS's ever-shifting investment bank?
Credit Suisse commodities reversal and why you mustn’t listen to banks when they say your job’s safe
The best and worst European investment banks to work for in 2014, by Morgan Stanley
Horror as HSBC & RBS far outperform Barclays’ FX professionals in Q1