McEwan hints at buying back own shares but warns no end in sight for cost-cutting

Speaking at the Bank of America Merrill Lynch Banking & Insurance conference in London, Mr McEwan warned that he would not sanction any let-up in his cost-cutting drive.

The news means the future of many of the Edinburgh-based bank’s workers will remain uncertain as the bank continues to rebuild after its 2008 taxpayer bailout at the height of the financial crisis.

The New Zealand-born banker also told the major financial conference that, in his personal view, he would like RBS to use any excess capital to buy back its own shares as the UK Government continues to sell down its stake, even at the cost of delaying a return to dividend payments to shareholders.

The Government made its first share sale earlier this year at a loss of around £1bn.

Mr McEwan statements came as he also announced that RBS will exceed its £800 million savings goal for 2015 by about £50m as a result of changes to the bank levy.

However, he stressed that there are still “significant” costs to be removed over the coming years.

Mr McEwan said: “Our aim to take our costs-to-income ratio to below 50 per cent remains a key part of our plan.

“I would also like to highlight that we have significant future cost opportunities in all parts of the bank, partly by tackling the high costs of our franchises that we are repositioning, but also through operational improvements in the UK personal and business banking and also in our commercial bank.”

Mr McEwan went on to outline how he wants RBS to be positioned by 2019, with simpler products and greater trust from customers at the heart of his plan.

Asked if revenue increases had been factored into financial projections, he said growth was likely to be limited across the industry until interest rates start to rise.

He said: “So it has to be a cost play for us. Over the next three years to 2018 we have substantial amounts to get us down to the cost-to-income ratio .

“At that point there is still more work to do. A bank like ours needs to be in the 40s.”

Mr McEwan suggested some savings would come from reducing the bank’s processes, registered companies and products. He remains committed to overhauling RBS’s corporate and institutional business, its UK private bank and Ulster Bank. Job losses in the corporate business were estimated to be up to 14,000 by 2019 according to market estimates published earlier this year.

He said: “We have a clear plan to materially reduce costs and improve their productivity. Ulster Bank and private bank currently have unacceptably high levels of costs in the businesses and require repositioning as leaner, more efficient franchises.

“Our corporate and institutional bank is undergoing a multi-year transformational programme.”

On the prickly topic of returning capital to shareholders, Mr McEwan said the bank had not changed its view that the first quarter of 2017 was the earliest that was likely to happen.

He said: “We have to get ourselves into a position where the PRA is comfortable with us returning money through any of those forms back to our shareholders.

“My own personal view – this isn’t agreed with board – is I would rather participate as the Government is selling down in the buybacks, be part of that exercise.

“At some stage we would like to put a dividend policy in place but I would like to actually participate. I think it is the best thing for all investors where excess capital goes back through buyback.”