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RBS chief unveils strategy: cut costs and improve customer service

ROYAL Bank of Scotland chief executive Ross McEwan talked a lot about trust as he presented the institution's 2013 results.

He highlighted a lack of trust in the banking sector as a whole.

This should hardly come as a surprise to him, or to any of the other top brass in the banking sector.

After all, we cannot even trust the banks to tackle the bonus culture that played a huge part in the financial crisis and ensuing downturn.

The 81%-taxpayer-owned RBS yesterday unveiled bonuses of £576 million for 2013, as it reported a pre-tax loss of £8.2bn. This bumper bonus pool was down 15% from £679m in 2012, but that is hardly the point.

News of the latest bonus bonanza at RBS followed HSBC's revelation on Monday of moves to ensure it could continue to pay its chief executive and investment bankers what it thinks it needs to pay them, claiming that the European Union bonus cap proposal would otherwise see it lose top talent.

At the height of the global financial crisis, there had appeared to be a glimmer of hope that governments of the major nations might do something about the damaging bonus culture in banking. But this was a mirage.

Five years later, the argument from the banks remains as circular as it is familiar as it is tiresome. Each bank argues there is a market rate for bonuses, and that it must pay at least this to ensure it recruits top talent.

But no-one appears willing or able to move the market rate.

It is now clear there is a lamentable inevitability when it comes to bonuses. They will continue as before, whether a bank makes a profit or a whopping loss and regardless of the justified incredulity among much of the population about why the self-styled Masters of the Universe in the financial sector feel so entitled to a bonus for doing a day's work.

So, Mr McEwan, you should not be surprised by the lack of trust in the banking sector.

Mr McEwan also addressed the perception of RBS, declaring: "We are the least trusted company in the least trusted sector of the economy."

He is to be commended for not mincing his words on this score.

In late January, RBS announced fresh exceptional charges totalling about £3bn, described as "provisions for litigation and conduct-related matters".

These provisions are aimed at covering litigation for mortgage-backed securities, and redress for customers claiming they were mis-sold payment protection insurance or interest rate hedging products.

In its full-year results statement yesterday, under the heading of "key points", the bank declares: "RBS announces a refreshed strategic direction with the ambition of building a bank that earns its customers' trust by serving them better than any other bank."

Fine words indeed, if the corporate jargon is removed.

RBS, in its heyday, was renowned for its customer service in the personal banking arena.

But times have changed, and matters will not have been helped by the massive cost-cutting programme which has been going on since RBS's near-collapse and taxpayer bail-out in the autumn of 2008.

Mr McEwan noted last year that the RBS brand was languishing near the base of the big banks. The RBS chief is making it his priority to address this.

He said yesterday: "I will deliver a bank that is number one for customer service in every customer category we compete in, from personal banking to support for big UK businesses."

So just how does Mr McEwan, who succeeded Stephen Hester as chief executive of RBS last autumn, plan to go about achieving this?

People could be forgiven for thinking RBS's statement of intent on customer service implies a need for extra resources, maybe even more staff. So the approach outlined by Mr McEwan might come as a surprise.

RBS declared it expected its underlying cost base would be £1bn lower in 2014. Mr McEwan declined to say how many more job losses RBS's refreshed strategy would entail. But you would guess it could run to many thousands, on top of tens of thousands of job cuts in recent years.

So, basically, it would appear that Mr McEwan is embarking on a drive to improve customer service while slashing costs at the same time.

He has made it plain he is a big fan of technology, having talked about the appetite of RBS customers to do their banking on mobile phones on their way into work in the morning.

In an interview with The Herald last April, when he was head of RBS's UK retail banking operations, Mr McEwan revealed about 10% of branches were likely to be axed, with the institution considering any closure of the last bank in town on "individual merits".

To be fair to Mr McEwan, he will, to some extent, be boxed in by the Treasury's wishes for RBS. Further retrenchment to the UK market-place, which is far from strong, will limit RBS's ability to benefit from superior performances by overseas economies.

But Mr McEwan should not under-estimate the impact of thousands more job losses, and yet another sweeping reorganisation programme, on the morale of staff who could be forgiven for being sick and tired of seemingly endless cuts and restructuring.

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