RBS has neither the money nor the reason to celebrate a job well done this year. Last night’s party in Stamford (at the office) was as disappointing as one could expect for a firm whose ass is owned by the UK government (except for the department that took theirs off-site to Foxwoods) and the celebrations across the pond will probably be just as bad, with only 10 pounds ($16) being spent on each employee. Obviously one would expect the people forced to attend these depressing events to be a bit upset, though presumably no one else would give a fuck. Except one. Party planner Di Bailey was asked for her thoughts on the matter and bitch is pissed. She can’t conceive of how RBS could even dream of throwing a soiree on such a tiny budget and is so disgusted that she washes her hands of the whole situation. She wants nothing to do with this thing and until the bank allots the proper amount of money for the gala it so richly deserves, she suggests employees go ice skating.
Di Bailey, managing director at Planit Events Ltd., whose clients include HSBC Holdings Plc and Morgan Stanley, recommends employers spend about 80 pounds-a-head to ensure a “decent” party. Bailey said she couldn’t organize an event at a cost of 10 pounds-per-employee and recommended staff use the money to go ice-skating instead.
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The British government is getting a much-needed from the country’s National Audit Office. It’s pissed off anyway.
The NAO concludes that “the Treasury was justified in using taxpayers’ money” and that “it is difficult to imagine the scale of the consequences for the economy and society if major banks have been allowed to collapse.” But it also suggests that the government’s had no clue about what it was doing less than a week before it did it.
Internal papers prepared by the Treasury suggested that RBS’ capital position was reasonably strong but noted that the bank was increasingly dependent on short-term wholesale funding. Less than a week later, however, the authorities unexpectedly found that RBS could no longer access the wholesale funds it needed.
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A couple weeks ago RBS announced that it would be accepting a few more billion in bailout funds from the UK government. Some employees wondered why this was necessary and today we have an answer. The Telegraph reports that the bank needs the money for booze, a karaoke machine, and dancing girls. Why? First, if you need a reason for drunk karaoke, you need to reevaluate your life and second, in all seriousness, it’s because they need to get wasted on the job. The earlier the better.
Senior executives have applied for a licence for alcohol to be served from 7am and to hold karaoke events on all eight storeys of their central London offices over Christmas. The bank’s licence application submitted last week asks permission to provide liquor until midnight “for staff and/or guests at meetings, conferences, dinners and functions” at its £182 million City of London offices. It adds: “If there is a champagne breakfast meeting scheduled, the supply of alcohol may commence at 0700 hrs.”
Of course, some people, who just don’t get RBS like we do, feel the need to rag on the good time and brilliant profitability scheme.
Eddy Weatherill, of the Independent Banking Advisory Service, said: “Why do they need a licence to drink 365 days a year? That’s more like a gentleman’s club than a bank. “They must know everybody’s waiting for them to get egg on their faces, yet they apply for a licence for champagne breakfasts and karaoke. “They never cease to amaze me and the public will be incensed. They will try to spin it but it’s clear what’s going on. It’s all going to be paid for by the taxpayer in the end.”
Which is fine, but Ed should know he’s ensured he won’t be invited to take part in the lap dances.
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The British Treasury is pouring another £39.2 billion into the country’s two largest banks. And even though it may saddle the U.K. itself with another £13 billion in debt, Prime Minister Gordon Brown–in an electorally-suicidal game of three-card bailout monte–calls the deal with RBS and Lloyds Banking Group a boon for the taxpayer.
“At the end of the day, banks will be paying more to the British public, not the other way round,” Brown assured a country itching to toss him out of office at the first opportunity, one they’ll get by June.
According to Brown, the new bailout will reduce the Treasury’s risk exposure by as much as £300 billion and wean RBS and Lloyds from their newfound dependency on taxpayer pounds. It will certainly be interesting to hear him mumbling, stumbling and stuttering that on the campaign trail.
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Back in the “any port in a storm” days in February, RBS was foolish enough to commit to a legally binding lending quota in exchange for a few more wheels of government cheese. (One can only hope it was imported from France, but we doubt it.) RBS had to pay for the recently constructed largest trading floor in the known universe, after all. (Don’t be sad. The UBS building is there to keep it company.) So, some £25 billion was supposed to flow into the hands of RBS borrowers… and hasn’t.
With “the government” as a 70%+ owner of RBS (through the proxy of “United Kingdom Financial Investments,” the British version of the trusts holding shares in U.S. bailout recipients) RBS could effectively be a government ministry. The lending quotas were intended to present the illusion that RBS would be permitted to make commercially reasonable loans without interference from the UKFI. That, of course, is impossible.
Lending quotas, so popular with U.S. institutions as the “anti-redline spray” used to ward off the enforcement agencies, certain civic leaders and “community organizers” back in the ’90s (we understand that Deep Woods Pay-Off™ works well too) are, by definition, either too low, and therefore useless, or too high. In the latter case, the only way to comply is, obviously, to reduce underwriting standards. The soft illusion spun by the quota quickly evaporates in this case. There is nothing commercially reasonable about quotas, no matter how they are dressed up.
The great irony is that RBS is complaining that a number of business customers have paid back loans early, lowering their lending figures. Tragic, we know.
Still, even the scintillating intellect and pure management acumen of Alistair Darling is insufficient, it seems, to curb the current crisis without some force-fed debt from the captives. Accordingly, now is probably the perfect time to take your one page business plan for a global chain of authentic British cuisine restaurants on over to RBS.
RBS Is Missing Lending Target [BBC News]
You’ve got to hand it to the guys at Austin-based Amherst Holdings, they’ve got some serious moxy. Over the past year, Amherst sold credit protection to JPM on some Lehman-issued subprime MBS and later encouraged the servicer, Aurora Loan Services, to buy the outstanding loans. This made the CDS it sold to JPM completely worthless (BAC and RBS also bought protection on the bonds, but through other counterparties). Far from admitting any impropriety, Amherst contends that it was simply in the right place at the right time.
Amherst says it didn’t do anything improper, but took advantage of an opportunity when it emerged. A lawyer reviewed and blessed the strategy for the firm, according to people familiar with the matter.
Privately held Amherst says it acted in good faith trying to limit losses for clients, who had sold credit-default swaps on the securities. “We wouldn’t jeopardize our business and reputation by entering into an opportunistic trade knowing what the outcome would be,” said Amherst’s chief executive, Sean Dobson.
A Daring Trade Has Wall Street Seething [WSJ]
RBS apparently laid off its entire Leveraged Finance Group globally yesterday, which, we’re told, “includes everyone (Group heads, MDs, VPs, Associates and Analysts) at their New York office, LA office, London headquarters and multiple other European offices.” Tipster Fred Goodwin added: “For some perspective, the Leveraged Finance Group at RBS pre-credit crisis was the premier leveraged finance platform in Europe for many years.”
We may well get to watch a sizable good bank / bad bank plan in action before long. RBS has decided to go the fiscal hermaphrodite route (we understand the surgery is radical and risky enough that lots of capital infusions are being hung on the drip cart in preparation).
The Royal Bank of Scotland (RBS) is to be split into a “good bank” and “bad bank” in a dramatic rescue restructuring in which assets worth several hundred billion pounds will be put up for sale.
Stephen Hester, RBS chief executive, will outline the plans this week as he unveils Britain’s biggest-ever corporate loss of up to £28 billion. He will cut costs by more than £1 billion a year, a move expected to lead to the loss of about 20,000 jobs, more than half of which will be in Britain.
Large parts of the group’s investment-banking business will be earmarked for sale or closed down. Its Asian operations and retail operations across central and eastern Europe will also be sold off.
All these operations will be bundled together in a “bad bank” inside the group, which will report its figures separately.
Given the almost caustic split between views on the wisdom of the “good bank / bad bank” method, it will be interesting to see how the process develops. What say you? Is this likely to turn out to be brilliant elective surgery or result in a lingering, hospital-acquired and antibiotic-resistant infection?
Radical revamp splits RBS in two [Times Online]
You sort of knew it was percolating anyhow over in the UK, but it seems to have come to a boil (ahem).
Barclays announced a top-level review of its bonus structure on Monday, amid a growing political clamour in Britain over rewards paid to bankers in the midst of the credit crunch.
Gordon Brown, British prime minister, said he was “angry” that Royal Bank of Scotland – a part-nationalised bank – was preparing to pay out £1bn ($1.5bn) in bonuses. Other ministers urged bankers to forgo their rewards.
The start of the bank bonus season has provoked a wave of anger towards bankers in Britain. On Monday the former bosses of RBS and HBOS will be grilled by MPs on how they led their institutions to the edge of collapse.
After Dick Fuld and the SEC we find it hard to imagine anything would be more entertaining, but we haven’t seen Questions to the Prime Minister in a while.
Barclays to review bonus policy amid clamour [The Financial Times]
The Royal Bank of Scotland reported losses of 761 million pounds today, due to a 5.9 billion pound writedown on risky assets. Chief executive officer Fred Goodwin described the bad news as “a chastening experience” that every bank should go through at least once. Soon to be laid off employees? Shareholders? What’s your take on the sitch?
RBS suffers first-ever loss after $11 bln writedown [Reuters]
We love wildly irresponsible predictions. If they don’t come to pass, well, it was just comedy. If, however, they do….
So when RBS announces not just that they are writing down $12 billion, but that they are looking to raise $20+ billion in capital (the largest rights issue in British banking history), and there is absolutely no truth whatsoever at all that the government applied any pressure on the bank, none, really, we smile a little. It’s a sad smile though. Seriously.
As if that is not enough, add Shades of Schwartz(tm): Fred Goodwin, RBS’ Chief Executive, promised (for real this time) that RBS would not need to raise any new capital. $0-$20 billion is not really that wide a spread, when you think about it though.
But if you are an existing shareholder, don’t worry. They still plan to pay their pending dividend… in shares.
RBS Takes Further Write-Downs, Plans $23.78 Billion Rights Issue [WSJ]