Zacks_Analysts' Blog : RBS to Retrench Banking Jobs - Analyst Blog

Royal Bank of Scotland Group plc (RBS) is planning job cuts in its investment banking unit, Financial Times reported on Wednesday. The workforce to be trimmed might reach 2,000.

RBS is restructuring its business and reducing its workforce due to slow recovery in markets and stringent regulations. As per an RBS spokesman, the bank would have more layoffs over time, including its global banking and markets (GBM) investment banking unit. 

Since the financial crisis, RBS has slashed 27,500 jobs, which also includes retrenchment in its global banking and markets unit. Further, the bank has reduced its investment banking business invariably cutting down its client base to 5,000 from 26,000 before the financial crisis and exited 12 countries.

Going forward, RBS expects growth in the U.S. and Europe to remain sluggish as long as the impact of high debt levels and government budget cuts weigh on economic activity.

While RBS is planning for a job cut, it is refocusing on growth in the emerging countries and continuing to hire people to boost its business in those regions. RBS has boosted its investment banking business in China by appointing two senior investment bankers to its team. The hiring follows the joint venture (JV) between RBS and Guolian Securities Co. Ltd., named Huaying Securities Co. Ltd, which was launched in May.

China’s increasing investment banking market is lucrative for foreign companies. In fact, a number of U.S. and U.K. banks are making efforts to set up JVs in that country. Launching a JV in China and strengthening its team looks like a strategic fit for RBS given its keenness to explore the country’s thriving economy and booming capital market.

In UK, RBS remains concerned that regulatory activities under contemplation and the ongoing regulatory uncertainty will constrain the supply of credit to the real economy, and result in sub-par economic growth.

Similar to RBS, other biggies such as HSBC Holdings plc (HBC), UBS AG (UBS) and Barclays plc. (BCS) are resorting to job cuts in an effort to reduce costs due to the challenging market conditions in the U.S. and Europe. We expect the global banks to continue to trim workforce in the next couple of years until the economy improves substantially in these regions.