TAXPAYER-OWNED Royal Bank of Scotland (RBS) has declared it will ring-fence its retail operations from its investment banking activities in time to meet the January 1, 2019 deadline set by the UK Government, as it unveiled plans to drop the RBS brand from customer-facing operations.
The Edinburgh-based lender has announced it will set up an interim ring-fenced holding company, NatWest Holdings Limited, under which it will operate five retail banks. That means RBS branches in Scotland will be rebranded Royal Bank of Scotland. 
The restructuring will ensure the bank meets legislation requiring UK lenders to separate personal banking from riskier, so-called “casino banking”, and to avoid a repeat of the multi-billion pound bailouts the Government was forced to stage after the financial crisis in 2008/09.
At Royal Bank the long-trailed rebranding move has been billed as an attempt by the state-owned bank to distance itself from the RBS brand, which is believed to have become tarnished as the bank has posted successive losses, slashed thousands of jobs and paid out billions in misconduct fines.
However one analyst said the rebranding amounted to “plastering over the cracks” on the bank’s long road back to health, which continues to be impeded by legacy issues such as the PPI (payment protection insurance) scandal. It emerged this week that RBS has so far run up a £100 million bill in its defence of a shareholder action over its £12 billion rights issue in 2008.
The challenges facing UK banks have been underlined this week by events at Deutsche Bank, which has seen its share price plunge after being hit with a $14 billion fine in the US for mis-selling mortgage-backed securities. Shares rallied yesterday amid speculation the settlement could be lower. RBS itself agreed to pay $1.1bn (£845m) to a US regulator to settle two claims over mis-sold mortgage bonds in the run-up to the financial crisis. It continues to face conduct-related investigations and litigation across the Atlantic that could cost it billions.
Major UK banks have also flagged the likely impact on revenue from the reduction in interest rates to 0.25 per cent following the Brexit vote.
“There is nothing radically earth-shattering in the announcement today, particularly in the context of what else is going on in the banking sector,” said Laith Khalaf, senior analyst at Hargreaves Lansdown. “In particular, [with] what is going on at Deutsche Bank there is a direct parallel with Royal Bank of Scotland, because RBS is also expecting a US dollar fine at some point this year from the Department of Justice.
“We knew the ring-fencing would have to happen. The branding stuff is interesting, but it is not likely to have a material impact on Royal Bank of Scotland’s business, which is much more likely to be dominated by that threat of litigation and conduct costs, restructuring and the low interest rate environment. Really what is happening today is superficial – there are deeper issues at play in Royal Bank of Scotland.”
Under the RBS restructure, NatWest will become the chief retail brand in England and Wales, with Ulster Bank remaining the customer-facing brand in Northern Ireland and the Republic of Ireland. Private banking brands Adam & Company and Coutts, and the Lombard invoice finance operation, will be among its other ring-fenced operations.
Meanwhile, RBS, which is 71.1 per cent owned by the UK Government, said its investment banking activities will become part of a non-ring-fenced entity. That will comprise three brands, NatWest Markets, RBS International, and Isle of Man Bank.
All operations will come under one group holding company, The Royal Bank of Scotland Group plc.
Chief executive Ross McEwan said: “Our proposed future structure under the ring-fencing legislation and our brand strategy are key elements of the bank we are becoming. 
“The future ring-fenced structure of the bank is not only designed to be in compliance with the new regulatory requirements and objectives but will better reflect who we are as a bank and what we stand for: a bank that is focused on its customers.”
Meanwhile, a spokesman for RBS said the bank is continuing to pursue a trade sale of its Williams & Glyn unit, after admitting it may not manage to offload the 300-plus branches by the end of the year. It was told to sell the unit by 2017 by the European Union as a condition of its government bailout in 2008.
Santander, which has pulled out of the running for Williams & Glyn for a second time, warned yesterday that lower interest rates in the UK and Britain’s withdrawal from the EU would undermine profits in the years ahead. RBS shares edged up 1.7p at 178.8p.