Fixed income: RBS creates its own kind of FIG business
New FIG chief William Fall is building on bank’s DCM and structuring strengths; Bank sees business opportunity arising from its own traumas
On November 3 RBS announced a 20% quarterly decline in third-quarter investment banking revenues. Subsequently last month, with rising risk-weighted assets and amid worries about exposure to Ireland, the bank’s share price fell by nearly 15%. Fiona Swaffield, analyst at Execution Noble, warned investors: "Over the next 12 months, we find it difficult for RBS to trade above its tangible book value of 51.8p/share, as the bank is likely not to earn rates of return in excess of its cost of capital for another two years." At the end of the month, RBS shares were changing hands at just under 40p.
While group chief executive Stephen Hester and his senior management team have won deserved plaudits for their efforts to restructure the group, run down non-core assets, improve funding and liquidity, and better manage the business mix, much remains to be done.