TEN short years ago, the Royal Bank of Scotland was a commercial colossus, making £1 million every hour in profit and a swashbuckling chief executive’ pulling off audacious take-overs as his bank clambered on to the world stage.
A regional player which became the fifth largest bank in the world, RBS bought the Netherlands main banking operator in a deal celebrated in the plush executive wing of the bank’s £350 million Edinburgh HQ.
But within months, the RBS ‘economic miracle’ had become a nightmare for the excutives, directors, staff and every taxpayer in the country.
Ten years on from the ABN Amro takeover, the taxpayer could be on the hook for £14 billion – the equivalent of £477 for every UK taxpayer – once the UK Government’s majority shareholding is sold in RBS.
The executive wing – and its reported £100-per-square-yard carpet – has been ripped out and replaced with a hub for entrepreneurs.
The executives appear to have gone too.
Research by The Sunday Post shows two of the 10 executive board members of RBS live in Scotland – a sharp contrast to the days when Edinburgh-based Fred Goodwin had his closest lieutenants to hand in the Capital.
RBS points out it remains one of the biggest private employers in Scotland, with more than 10,000 workers.
But critics claim the Royal Bank of London would be a better name for the troubled financial institution these days.
Kevin Dowd, Professor of Finance and Economics in Durham University’s Business School, said: “The way I would describe RBS is an ex-Scottish bank.
“It is Scottish in name only. It was one of the great banks of the past. It has a great history but it has gone ‘belly up’ in the last 10 years.
“In reality it’s a London bank and the rest of it is just some kind of fig leaf and I think that’s very sad given the history of Scottish banking, which was far superior to English banking historically.”
The cold facts on RBS remain quite sobering for taxpayers – even a decade on.
In the autumn of 2007, RBS stunned the city by announcing an operating profit of £10.3 billion – the biggest ever for a Scottish company – and the equivalent of £1 million per hour. Just 18 months later, the same bank set another record, the biggest loss in British corporate history – £28 billion.
This was amidst the well-documented financial crash which put the future of the British economy on the line and the taxpayer bailed a string of banks out, including a £45 billion aid package for the stricken RBS.
If the UK Government’s stake in RBS was sold today, then after taking into account the bailout and all receipts to date, the taxpayer would be down £14 billion.
RBS argues that the UK Government intervention at the time was not meant as a profit-making exercise but more to stabilise the UK’s economy.
Professor Dowd continued: “Had there been no Government involvement, the bank would have gone bust and the shareholders would have lost everything.
“Obviously, it is difficult to assess these things as Government involvement has affected the whole calculation.
“Share prices were 502p in 2008 and are around 283p now. That means an investor would have lost about half of the investment and dividends.”
On the future of RBS – which now employs 75,000 people compared to a high of 200,000 in 2008 – he added: “People have been predicting a turnaround in RBS for years and years and the Government has been saying it is going to sell it off for years. I think it’s just can-kicking. Real estate is nearly a quarter of RBS’s total assets. They haven’t the scope to absorb major losses. I would be worried about RBS for all sorts of reasons.”
The RBS HQ at Gogarburn on the outskirts of Edinburgh opened in 2005 and was built in the mould of the offices of American technology giants such as Google, complete with its own Tesco, Starbucks, swimming pool and 500-seat restaurant.
A further example of the excesses at the time was the bank’s acquisition of a £17 million private jet, based in Paris, to ferry Goodwin and the executives around.
Gogarburn remains a busy, vibrant office – partly as a result of office consolidation across Edinburgh.
But insiders say it is rare to see many executives around, certainly not compared to a decade ago.
Of its 10 executive board members, only Simon McNamara, group chief administrative officer, and Les Matheson, chief executive of personal and business banking, live in Scotland. Chief Executive Ross McEwan has a home in London.
RBS has indicated that it would move its HQ to London in the event of Scottish independence, though it insists this is more of a “brass plaque move” with little impact on jobs. The bank is also considering using the Netherlands as its trading base in the European Union once Britain leaves the trading block.
This makes local MP Christine Jardine, Lib Dem spokeswoman for Scotland, nervous.
She said: “RBS is a major employer and their future stability is crucial not just to the economic well-being of Edinburgh West, but also to the wider economy.
“It would be tremendously disappointing if we were to see a shift in focus away from their historic roots in Scotland.
“I will continue to seek assurances from them on their commitment to maintaining wider employment in Edinburgh West.”
Last week RBS executives were awarded fixed share allowances worth £3.2 million for the six months to December 31, with chief executive Mr McEwan banking an allowance – before tax – of £490,000.
The New Zealander gave around £85,000 worth of these shares to charity.
A Royal Bank of Scotland spokesman said: “We’re proud to serve Scotland and we play a central role in the Scottish economy with one in five people and one in three businesses banking with us. We employ more than 10,000 people and are one of Scotland’s biggest private employers.
“We have 1.7 million personal customers that trust us with their banking in Scotland, as well as 140,000 business and commercial customers, 31,000 private customers and 27,000 clubs and societies.”