RBS shareholders vent frustrations as departing chairman defends record

Royal Bank of Scotland bosses yesterday came under fire from the still 80 per cent state-owned bank’s angry shareholders who called for answers over a litany of issues still plaguing the lender.

On the minds of those attending the two hour long meeting at the bank’s sprawling Gogarburn HQ just outside of Edinburgh was the “systematic” mistreatment of firms with distressed finances, continuing IT meltdowns, a seemingly unending stream of misconduct fines, branch closures and the recently-announced plan for reprivatisation.

Taking the brunt of the flack, outgoing chairman Sir Philip Hampton defended himself against sharp and personal criticism which focused on misconduct issues such the mis-selling of financial products to customers, that have cost the bank to date nearly £10bn and prevented its recovery from the financial crash.

Questions were also asked about the ongoing Financial Conduct Authority investigation into the conduct of the bank’s business division that has been accused of asset stripping SMEs it had forced to the wall with the use of aggressive lending and debt management practices.

Citing an overarching cultural issue for previous misconduct, Mr Hampton, who is standing down as chairman at the end of August to take up the chair at pharmaceutical giant GSK, said that a change of culture at the bank is “well under way”.

However, he cautioned: “Culture is a journey, not an end point. You don’t change culture by flicking a switch. You have to flick thousands and thousands of switches over a number of years.

“The process of cleaning up the industry is well under way. It’s not done, but it’s well under way.”

Looking at the longer term, and across his time as chairman, he added that the bank has been “fundamentally rebuilt” and is now “a bank that is much safer in capital strength, in structure and increasingly on behaviour”.

Yesterday’s AGM came just weeks after Chancellor, George Osborne, said he intends to start selling the Treasury’s 80 per cent share of the bank taken on in 2008 after the bank’s £45bn bailout.

The selling of the Government’s stake in tranches is expected to be aided by the return to paying shareholder dividends, as well as the floating of RBS’s Citizens Bank subsidiary in the US, but the audience was warned that the process will take several years.

In his seventh statement to an RBS annual general meeting, Mr Hampton, who will be replaced by Sir Howard Davies, attempted to sweeten his message by suggesting, along with Chief executive Ross McEwan, that surplus capital released by the shrinking of the bank may be returned to shareholders.

This is after reaching a 13 per cent tier one capital reserve - the amount required by regulators to protect against future shocks - and after re-payment to the government of a remaining £1.2bn fee for its support.

Mr McEwan, said: “As we reduce risk, and make expected divestments over the coming years, we anticipate a substantial increase in our capital as a result.

“Subject to approval, we intend to return any surplus capital to our shareholders,” he said.

Last week’s IT meltdown was also on the agenda for shareholders with Sir Philip forced to concede that while £750m has recently been spent on systems, they still had to improve.

The bank could be in line for another hefty fine as a result of the debacle after it was hit with a £56m penalty for a similar meltdown in 2012.

However Mr McEwan acknowledged that the latest incident was on a smaller scale and it was announced that an inquiry into the failure, led by the chief executive himself, was underway.

Mr McEwan also used his report to shareholders to restate a four year strategy for the bank that will see it heavily refocused on retail and commercial banking with 85 per cent of its activity in that sphere as opposed to investment.

He also set out plans for women to play a more prominent role at the bank, with a target of occupying 30 per cent of senior roles across all divisions.

Meanwhile, Mr Hampton cited a sharp drop in use of RBS branches, and a fast rise in mobile banking as reason for branch closures.

He said: “Our busiest branch is now the commuter train from Reading to Paddington, where lots of people are doing their banking.”

Looking back on six and a half years as chairman, Sir Philip said he was sure he was leaving the lender in a stronger position. “There have been highs and lows along the way, but overall RBS made great progress since 2009”, he said.