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British financial giant Royal Bank of Scotland Group plc (LON:RBS) nestles among London’s huge global banks, and is one of the largest in the world despite its catastrophic failure in 2008 as a result of Former CEO Fred Goodwin’s failed mergers and acquisitions campaign which resulted in the bank’s operations becoming the concern of the British taxpayer.
The firm’s interests in other companies has been largely British or European, pre and post collapse, however the firm does maintain a substantial interest in North American bank, Citizens Financial Group Inc (NYSE:CFG), which the firm purchased under Mr. Goodwin’s aggressive expansion in 2004.
Today, it has been announced in a report by the Daily Mail’s This is Money that RBS has divested, taking its stake in the company down to just 50%, reinforcing the company’s focus on London.
The bank expects to raise $3 billion as a result of the sale of 115 million shares plus a potential 17.25 million shares in an over-allotment option.
Following the effective nationalization of RBS in 2008, speculation arose as to whether RBS would retain Citizens Bank. In 2012, public pressure in the United Kingdom grew for RBS to focus on its home market and sell foreign assets, including Citizens Bank, in order for UK taxpayers to earn their money back, especially in the aftermath of the less than dignified exit from the firm of Mr. Goodwin, whose pension entitlement, represented by a notional fund of £8 million, was doubled, to a notional fund of £16 million or more, because under the terms of the scheme he was entitled to receive, at age 50, benefits which would otherwise have been available to him only if he had worked until age 60.
This move was met with public disdain as the bank’s debts were transferred to the taxpayer and Mr. Goodwin unapologetically doubled his pension, and the treasury minister of the time, Lord Myners had indicated to RBS that there should be “no reward for failure.”
Like many British financial giants which faced vast toxic debt in the 2008/2009 financial crisis, RBS’ woes did not stop when the nationalization and installation of new management took place, as the bank sustained loss of £3.5 billion in 2014, which is the seventh consecutive year of losses, and said this partly came after it had to write down the value of Citizens by £4 billion as it paid too much when it acquired it in 1988.
Regulatory fines for its part in the global FX rate rigging case did not help, as the bank was one of six major institutions which were collectively fined $4.3 billion, approximately half a billion dollars of which was attributable to RBS by Swiss, US and British regulators, with several class action lawsuits still pending.
The retraction from overseas markets for RBS has not been confined to this divestment from America’s Citizens Financial Group, as the bank has decided to remove its presence from several European countries as well as the Middle East and Asia, resulting in 19,000 redundancies, the same number of potential redundancies that compatriot and rival Barclays looked to let go last summer.