SINGAPORE - After being bruised and battered in the aftermath of the 2008 financial crisis, then rescued by the British government, Royal Bank of Scotland (RBS) has completed three and a half years of its five-year recovery plan.
The process has been painful as it shed many long-standing businesses and refocused on others, but the payoffs have been huge, said Madan Menon, RBS's Asia Pacific head of international banking (IB Apac).
"We've gone about doing what we needed to do, and have made substantial progress over the past three years," Mr Menon said. "We have shrunk our balance sheet, become more focused on our core business, and have been making some mid-course corrections along the way."
Indeed, the bank is a different animal compared to what it used to be in mid-2009. Deleveraging has shrunk its balance sheet by £600 billion, while non-core assets are down to £72 billion. Loan losses (impairments) were halved to £7.4 billion in 2011, while loans-to-deposit ratio is down from 154 per cent from October 2008 to 92 per cent now.
Tier 1 Capital has tripled over the past three years to 11.1 per cent, while the bank's liquidity portfolio has increased from £90 billion to £156 billion. Short-term wholesale funding is down to £62 billion, and coverage ratio is at 2.5x short-term wholesale funding needs.
It recently closed its UK Asset Protection Scheme to the tune of £2.5 billion, saving itself expensive premiums. And the Financial Times projects RBS could start paying dividends in the second quarter.
But there have been bumps along the road, the latest being Santander Bank's unexpected decision to back off from buying 316 RBS branches across Europe.
Operationally, RBS has jettisoned riskier proprietary businesses such as cash, equities and corporate broking, to focus on businesses catering purely to clients, like fixed income, debt capitalisation/securitisation, advisory and risk management.
It operates in 11 markets in Asia, with Singapore as its regional headquarters for its Markets & International Banking business, employing close to 3,000 people.
Mr Menon expects his IB Apac business - which has 400 frontline bankers - to significantly increase its contribution to RBS' global IB revenues as it grows 10 to 15 per cent over the next 3-5 years.
"We have acquired a full scope of sensible licences in all our Apac markets to conduct business and offer products which are consistent with our model. We have seven desks within IB Apac to capture intra-Asian trade, investment and capital flows, and help form a beachhead for corporates from UK and elsewhere to want to come to this part of the world. Similarly, many Apac corporates desire access and engagement to the UK market and elsewhere, and we help with our banking desks there."
The entire model has been fine-tuned to increase traction with existing clients and capture new clients. "We currently have about 6 per cent of clients' wallet (ie share of IB business), and aim to increase that by about 2-3 percentage points."
But how much will its Apac IB business contribute to the group's IB revenues in, say 3-5 years? "I would be disappointed if we do not account for more than 20 per cent of the pie," he replied.
The recovery has caught the eyes of industry insiders, he said. "As we continue to make good progress and track well on our restructuring programme, we are attracting and hiring the right talents."
Today, RBS is 82 per cent owned by the UK government - which coughed up £45 billion (S$88.5 billion) as part of the rescue plan in February 2009.
But it is a different animal now, Mr Menon said. "The banking model has changed forever," he said. "Thematically, it is now built around client support. Today, we operate a sustainable model which is more harmonised, less volatile and value enhancing."
The takeaway? After being bruised and almost written off three years ago, a leaner and meaner RBS is back in the game. And Asia Pacific will be a key player.