COMPANY PROFILE -The Royal Bank of Scotland (RBS) Group
Business Sector :Banking
Operating Geography :United Kingdom, Europe
About The Royal Bank of Scotland (RBS) Group :The Royal Bank of Scotland Group plc. (RBS or 'the group') is the holding company of one of the world's largest banking and financial services groups. The group operates in the UK, US and internationally through its two principal subsidiaries, The Royal Bank of Scotland and NatWest. It is headquartered in Edinburgh, UK. It has over 64,000 employees as of January 2020.
The Royal Bank of Scotland (RBS) Group Revenue :
£14.25 billion – FY ended 31st Dec 2019
£13.40 billion – FY ended 31st Dec 2018
Competitive Analysis of The Royal Bank of Scotland (RBS) Group
|1. Systemic Importance to the UK's Economy Ensures Govt. support in Distress|
2. Dominant Position in the UK Corporate and Commercial Banking Market
3. Improving Risk profile due to decline in reliance on Wholesale Funding
|1. Litigation and Conduct Charges Impacting Operations
2. Restrictions on Dividend Payments
3. Inability to Spin Off Williams & Glyn
|1. Sale of Businesses to Focus on a Few Markets|
2. Investment in Small Businesses
|1. Government's Competition Review Findings Could Have an Adverse Impact
2. Increasing Competition from Challenger Banks
3. Likely Downturn in the UK Buy-To-Let Market
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Detailed SWOT Analysis of The Royal Bank of Scotland (RBS) Group
1. Systemic Importance to the UK's Economy Ensures Government's Support in Distress: Systemic importance of RBS to the UK's financial services industry can't be overemphasized. In December 2016, HM Treasury holdings in the RBS ordinary shares were 71.3%. If RBS were not a systemically important entity then the UK Government wouldn't have bolstered the group's capital resources.
2. Dominant Position in the UK Corporate and Commercial Banking Market: The group ranks as number one in a wide range of segments including UK payments, deposits, lending, asset finance, invoice finance and foreign exchange. In terms of retail banking in the UK, the group retains a very strong franchise operating under its RBS and NatWest brands. The group's domestic market share confers it a major competitive strength as the group still derives more than 90% of its revenue from the domestic market.
3. Improving Risk profile due to decline in reliance on Wholesale Funding: The group has been constantly reducing its reliance on volatile wholesale funding. The balance sheet has been reduced by over £700 billion from its peak. Also, RBS de-risked the balance sheet by reducing its Risk Weighted Assets (RWA) to £228.2 billion in FY2016 from £385 billion in FY2013. Altogether improved CET1 ratio and declined wholesale funding improved the group’s risk profile.
1. Litigation and Conduct Charges Impacting Operations: The group has been facing increasing litigation and conduct charges for the past few years. For instance, it has been facing charges related to, misleading statements in connection with the rights issue announced in 2008, LIBOR rigging in 2014, credit default swap antitrust litigation, FX antitrust litigation, US Treasury securities antitrust litigation, interest rate swaps antitrust litigation, CPDO litigation and Interest rate hedging products litigation. As a result, the group’s reputation was impacted and its profitability was impacted.
2. Restrictions on Dividend Payments: It has been 10 years since RBS has paid dividends to its shareholders. Even though it has returned to profit in the first quarter of the year the issues related to its commitment to EU competition chiefs regarding of closing of 300 branches and cases related to settlement with US authorities is met it will not be able to pay the dividends.
3. Inability to Spin Off Williams & Glyn: The group could not succeed in spinning off Williams & Glyn into a separate company. Since Santander pulled out of the deal to acquire the RBS branches in 2012, RBS has been working hard and investing heavily in carving out Williams & Glyn as an independent bank with the aim of floating it. RBS has, however, decided that a standalone Williams & Glyn would not be robust enough to survive in what has become a very harsh UK banking environment Moreover, if the group is unable to sell Williams & Glyn by the end of 2017 then it will have to incur further charges and strategic limitations.
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RBS Group SWOT and PESTLE analysis has been conducted by Mohit Bhat and reviewed by senior analysts from Barakaat Consulting.
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