Royal Bank of Scotland's £700 million reinvestment in its branch network is the latest signal the bank is "retooling" as well as restructuring, and aspiring to become a "really good bank", RBS chief executive Stephen Hester has said.

The spending programme unveiled on Monday, to refurbish more than 2000 branches and revitalise the brand in Scotland, reflects the jump in investment from 2% of revenues in 2009 to 13% this year, Mr Hester told a City audience at Morgan Stanley investment bank.

"Many people think this was all just about risk reduction – it was, we needed to stop going bust and restore the strength – but it was just as much about establishing strategic coherence in a bank that had become overstretched and wasn't fit for purpose strategically."

He went on: "Many of our businesses had been starved during the financial boom, in favour of dollars being spent on acquisitions. We have used a significant amount of the cost we have taken out to fund a retooling of our business."

UK retail banking was now making a 24% return on capital, against 1% at the low point, and the corporate business was earning 15% against 3%, Mr Hester said. Other areas had made slower progress and Ulster Bank was still showing a negative return well above 20%.

The RBS chief said conduct regulation demanded more management time than anything else, across the banks, and admitted there were "uncertainties still out there in terms of regulatory action and interpretation, which I don't think any of us at this point can cap off".

He said RBS had "done an OK job" in refocusing on customers but added: "Have we gone faster, have we broken out of the pack? No, that is a job ahead of us."

Mr Hester concluded: "What our industry has to do if it wants to make the journey from normal to really good is - to build everything around serving customers well. We do that a lot of the time but we don't do it enough of the time in our industry as a whole, or acknowledge that is our primary purpose."