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RBS investment banking fees slip in 2011

More context is given surrounding the 3,500 job cuts in RBS's investment banking operations

As widely reported on Thursday, RBS has slashed another 3,500 jobs – after shedding around 30,000 employees during the past two years, with 22,000 of these in the UK – and now data from Thomson Reuters' Deals Insight puts the cull into context:


So, highlights from the Deals Insight report include:

• With US$1.13 billion in advisory fees across all products, RBS took 13th place in the 2011 Global Investment Banking Fee Ranking.
• 2011 was the first year that RBS had fallen from 10th spot in the full-year fee rankings since our records began in 2000.

• Until RBS dropped from the top 10 in 2011, the same 10 banks had held all top 10 spots since our records began in 2000.

• So far this year, RBS has earned US$ 32.8 million in advisory fees and holds eighth place in the YTD 2012 Global IB Fee Ranking.

On Thursday, the 83% state-controlled UK bank revealed it was culling 3,500 jobs, as it looks to pare back its investment banking operations. RBS's CEO Stephen Hester said (emphasis is our own):

This strategy has succeeded in making RBS stronger and placing us on the road to long-term success.

We have reduced our balance sheet by some £600 billion and have rebuilt capital ratios that place us among our strongest international peers. Our core retail and commercial businesses outside Ireland now operate with an attractive return on equity overall.

Our investment bank has produced an average return on equity of 19% and delivered over £10 billion in profits since 2009. Our non-core assets have fallen below £100 billion, ahead of schedule. Profits from our core businesses have been essential to pay for the clean-up losses of RBS legacy.

But for our strategy to be effective, it must adjust to fresh challenges.

And it is clear that, particularly in the wholesale banking arena, significant new pressures have emerged. The changes we are announcing today seek to ensure that RBS is at the front of the pack in pursuing a strategy that reflects the environment we expect to operate in.

Our goal from these changes is to be more focused for customers, more conservatively funded, more efficient and with better, more stable returns for shareholders overall.

The changes will include an exit from cash equities, corporate broking, equity capital markets, and mergers and acquisitions businesses.

Significant reductions in balance sheet, funding requirements and cost base in the remaining wholesale businesses will be implemented

We are considering sale or closure options for our cash equities, corporate broking, equity capital markets, and mergers and acquisitions businesses which had income of £220 million in the nine months to September 2011 and are currently unprofitable

And only on January 4, Euromoney highlighted how according to data released by Thomson Reuters, global fees were $80.9 billion – down just 6% on last year. 

But if you look deeper, the news is far worse.

Total fees for Q4 2011 compared with the same period in 2010 are down 40%. And there is no bright spot – all of the main regions, including Asia, are down by around that amount.

Bankers who dispute that we are now in an era of lower fees – the new normal you keep hearing about – are in denial. 

Most of the top 10 banks’ fees have held up reasonably well. Top-ranked JPMorgan saw its fees decline by just 2% year-on-year.

But the exceptions have suffered terrible years: 

Goldman Sachs falls one place to fourth but its fees declined by more than 11%
UBS dropped 15%
RBS declined 16%
Nomura’s fees plummeted a shocking 34%.

- Euromoney Skew Blog

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