Royal Bank of Scotland (RBS), the taxpayer-backed lender, is finalising plans to pay bonuses of just over £300m for last year – the smallest pot since its bailout over a decade ago.
Daily Week News has learnt that RBS and its majority shareholder, UK Government Investments (UKGI), have agreed on a bonus pool worth about £305m for 2019.
The figure for variable pay, which will be disclosed alongside the bank’s annual results in just under a fortnight, will represent a reduction of just under 10% from last year’s bonus payments of £335m.
A City analyst said the cut was likely to reflect weaker performance in RBS’s NatWest Markets business – the investment and wholesale banking arm which typically awards higher payouts – as well as the group’s smaller overall workforce.
The £2,000 cap on cash bonuses at RBS, which has been imposed for the last decade, will remain in place, according to a source close to the bank.
Controversy over pay at RBS has receded significantly since the annual rows which beset the lender in the early years after its £45.5bn rescue.
The bank’s new chief executive, Alison Rose, is preparing a further shake-up of the group that will include substantial job cuts and changes to her management team.
Analysts at Barclays forecast that RBS will announce an operating profit of just over £4bn for 2019, and an attributable profit of £1.8bn – with earnings dented by another big charge in the third quarter for payment protection insurance compensation.
If confirmed, that would be its third consecutive annual profit.
Ms Rose, who recently took over from Ross McEwan, is expected to set out plans to improve customer service while continuing to slash costs.
Last weekend, The Sunday Times reported that one scenario under discussion inside the bank was for 3,700 jobs to be cut from RBS’s 65,000-strong workforce.
Ms Rose is not expected to be specific about headcount reductions in her results presentation this month.
The bank will, however, confirm that Mark Bailie, the chief executive of Bo, RBS’s digital lender, is leaving.
A search is also underway for a successor to Les Matheson, its chief executive of personal banking.
Ms Rose has already changed the leadership of NatWest Markets, part of RBS’s non-ring-fenced bank, with a new chief executive and finance chief to be appointed in the coming months.
RBS, which is 62% owned by the taxpayer following its bailout during the 2008 financial crisis, named a new finance chief, Katie Murray, just over a year ago.
Ms Rose’s inheritance from Mr McEwan, who ran RBS for more than five years, includes tackling a still-bloated cost base, continued ultra-low interest rates and global trade tensions.
However, most of the scandals which plagued RBS in the decade after its rescue have now been consigned to the past following settlements costing many billions of pounds.
Its journey back to normality gathered momentum during the latter part of Mr McEwan’s tenure, with a £1bn dividend payment to the Treasury at the half-year stage a further indication of the surplus capital RBS is now generating.
Ms Rose has become an increasingly prominent figure in banking and political circles in the last couple of years.
She was promoted to become deputy chief executive of NatWest Holdings in 2018, and authored the Rose Review, a government-commissioned inquiry into the barriers facing female entrepreneurs.
If the UK economy performs well during her tenure, Ms Rose will have a reasonable chance of being the chief executive who completes RBS’s return to full private ownership.
Under Philip Hammond, the previous chancellor, the Treasury set a target date of 2024 for offloading the remaining government stake, although the public spending watchdog has cautioned about the anticipated pace of further share sales.
Sajid Javid, Mr Hammond’s successor, is likely to provide an update to that objective when he announces his Budget in March.
Taxpayers are ultimately likely to make a huge loss on the government’s RBS shareholding.
RBS declined to comment on Saturday.