Regrets about the loss of Royal Bank of Scotland

In my more than 30 years of my career in financial journalism, few memories are stronger than those of Royal Bank of Scotland (then one of the world's largest banks) on Tuesday, April 22, 2008.

At the time, the payment was a record of rights issues for a European company and followed a disastrous acquisition by British banks, the last fall of Dutch lender ABN AMRO.

The deal was supposed to be the glory of Fred Goodwin, the CEO of the Royal Bank of Scotland (RBS) who has established his biggest name in the past eight years after taking over the National Bank of Westminster (NATWEST) against the Royal Bank of Scotland (RBS) in early 2000.

As deputy to CEO George Mathewson, Goodwin earned the nickname "Fred the Chard" for his ability to cut costs. He has no shrinking violet. Mathewson himself, who did not gain infamous reputation in 2001, shrugged and rejected shareholder criticism of the executive bonus that year, saying “they would not win bragging power in the Soho Wine Bar.”

This confidence is directly through the Sog R. In March 2001, just one year after the NatWest acquisition was completed, Goodwin told me in a typical remark that he was considering the “mercy killing” of other British banks.

The killings never happened, but in the following six years, RBS tripled its size as it made a series of acquisitions, including British insurance company Churchill and Direct Rent, the U.S. lender charter (at the time of $15 billion lender), China's shares were 10% and 10% of the Bank of China, and in the year he earned it among the car operators in April 2002. Magazine.

When he launched the ABN Amro bid in April 2007, he beat the latter's previous deal with Barclays, Goodwin was the top dog in the UK's banking industry.

All of this makes the April 2008 issue of rights so dramatic. The press conference hurriedly convened the old London headquarters of Royal Bank of Scotland. (The global headquarters opened in 2005 and is a huge campus in Gogarburn in the outskirts of Edinburgh, built £350 million on a website previously occupied by a psychiatric hospital and nicknamed "Folly of Fred" by locals).

I took my place at the demo center on the ground floor of the building with Peter Thal Larsen, then-Financial Times bank editor, as he succeeded Mathewson as RBS chair in 2006, professional pharmacist Tom McKillop thanked us for coming and invited us to the speech.

Gone are the super confident characters we've gotten used to.

“He looked like a man of condemnation and put on scaffolding,” I whispered to Peter.

At the press conference, McKillop had to address questions about whether he would be fired to postpone the advice to the board that was “patsies” and they did not adequately challenge their CEO.

“No one is responsible for these incidents and finding a sacrificial lamb will only miss this,” McKelope said.

That night, I wrote in my diary: "McKillop almost lost a few times, especially when baked on board work. Fred Goodwin looked cha, but made up."

This is not an investment - this is a rescue

Memories of the day were flooded when the British government finally sold its remaining shares on Natwest (as the Royal Bank of Scotland was relisted in July 2020).

By 2008, when the Royal Bank of Scotland (RBS) acquired funds, its share price had fallen by a quarter, more than its stock market value was raised on the issue of rights.

On October 7, 2008, as corporate clients were eager to withdraw funds, McKillop was forced to ask then-Prime Minister Alistair Darling for a bailout, which eventually cost Goodwin his job.

As recorded, Gordon Brown's government controlled the bank, and in 2008 and 2009 acquired shares at a price of 45.5 billion pounds, reaching a peak of nearly 85%. Over the years, the government has recovered about £35 billion through expenses, dividends and sharing sales, crystallizing the loss of nearly £10.5 billion in disposal.

Naturally, this number plays a large role in British media coverage.

However, many comments ignore the government’s conclusion more than a decade ago that equity will cause losses and that the fact that this is never an investment that brings positive returns to taxpayers is a rescue.

One commentator even suggested that the Royal Bank of Scotland/NATWEST failure should be allowed and argued that “we can definitely do something more productive with all the funds that Natwest bundled over the past 17 years,” rather than ignoring the catastrophic impact of bank failure. During the rescue period, RBS's balance sheet was larger than the entire UK economy.

Of course, British taxpayers lost £10.5 billion in 17 years, which is frustrating. However, during this period, the fact that RBS/NATWEST was obliged to complicate this fact with its bailout conditions (the UK was compliant with the European Commission's national aid rules, including Direct Line) and its U.S. banking citizens (including Direct Line and its U.S. banking citizens).

Also wasted a lot of money trying to develop a separate retail bank that was once again attracted by European demands under the Williams & Glyn Brand, which was eliminated in the name of enhanced competition.

Worst of all, the forced sale to US private equity firm Bain Capital and International Private Equity Company World Payment Company sold to International for only $3 billion in August 2010. Later, the business floated on the London Stock Exchange and was later sold privately, and then sold to FINTECH, FIS FIS FIS FIS of the US Fintech company in March 2019, worth $43 billion, a small loss, the company is worth more than anyone else, and it is the responsibility of a British government.

It is hard to avoid the conclusion that if the UK was not bound by the European Commission's national aid rules, as is today, the destruction of value would be much lower.

Several things may be more important than any losses caused by taxpayers, and more important in the long run.

First, the lessons learned from the collapse of the Royal Bank of Scotland were properly learned. At the time of the bailout, many people who are now working in senior positions in UK Financial Services are still in schools or universities, but institutional memory of the incident remains very strong, especially among UK regulators.

The main reason for the failure of the Royal Bank of China (RBS) was the craziest ABN AMRO acquisition and the intensification of the then-AMRO AMRO AMRO was because of its over-leverage. Post-financial crisis regulations aim to reduce quasi-cyclicality and banks are obliged to increase their capital buffers.

The second is under Goodwin’s successors - Stephen Hester, Ross McEwan, Alison Rose and Paul Thwaite - Scotland Sue Region/Natwest (RBS/NATWEST) has been reshaped into financially strong, profitable lenders who can contribute well to UK growth in the coming years, especially in their excellent position in business banking.

In the coming years, most of its profits may be handed over to shareholders in the form of dividends and share buybacks.

On this basis, while some would celebrate the fact that the government has pulled a line from Natwest’s shareholder registration, others would question why it would be impossible for it to last longer.

It will be fun to hear what readers think.

- Ian King