According to a person with knowledge of the situation, Royal Bank of Scotland Group Plc is to pull out of fixed-income trading in Japan. The bank is to lay off some of its employees in the country, reducing their number by more than 200 to about 30. Most of the jobs will be cut by February 2015.
The bank refused to make any comments on the situation, but one of its former senior executives said for the Financial Times: “Things have been adjusted to fit the current business environment. But you’ve got to make money. If you’re not able to do that, or not prepared to — or some combination of the two — then the right thing to do is to stay home.”
Two persons familiar with the issue, who asked not to be identified because the details are still private, unveiled that the primary dealership in the government bond market in Japan is to be given up by the bank, which intends to keep only enough people to service its customers.
The step is part of the RBS efforts to downsize its investment banking operations. Under the lead of its Chief Executive Officer, Ross McEwan, the U.K.-based banking group has been following a global strategy to dispose of its fixed-income operations due to constantly rising regulatory costs, which affected RBS profitability.
Toshihiko Naito, an analyst at Japan Credit Rating Agency Ltd, said for Bloomberg: “RBS is under special circumstances as it is pursuing a reorganization of its business throughout the world. The profit opportunity for the primary dealers seems to be decreasing,” taking into account the accommodative monetary policy of the Central Bank.
RBS has set a goal of downsizing its businesses, which are not located in the U.K. to less than one-fourth of its total assets during the next few years. In comparison, these operations represented 27% of the banks total assets at the end of 2013.
Royal Bank of Scotland Group Plc lost 0.21% to trade at GBX 385.00 per share as of 8:19 GMT, marking a one-year gain of 17.77%. The group is valued at GBP 46.25 billion. According to the Financial Times, the 24 analysts offering 12-month price targets for Royal Bank of Scotland Group Plc have a median target of GBX 380.00, with a high estimate of GBX 500.00 and a low estimate of GBX 250.00. The median estimate represents a -2.11% decrease from the last price of GBX 388.20.
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