RBS close to making a full recovery, says boss

Speaking at a banking and insurance conference in London, Stephen Hester warned there were “important execution challenges” remaining and wider economic recovery was needed before the Government could reduce its 80 per cent stake in the lender. Mr Hester also touched briefly on industry-wide conduct issues, such as Libor-fixing, mis-sold payment protection insurance (PPI) and money laundering accusations, warning the various scandals would cost the bank “a lot of money”.

The widespread overhaul at the bank includes trimming the size of its investment banking arm, selling non-core businesses – such as RBS Aviation for nearly £5bn earlier this year – and focusing on high street services in the UK.

The shake-up at its investment banking division will reportedly lead to 3,800 job cuts by the end of next year – 300 more than previously anticipated.

Mr Hester said: “RBS is nearing the point of becoming a recovered bank and well on the way to being a good bank.

“I hope by 2013 the restructuring phase should be largely complete and I hope that our ongoing businesses should be largely retooled and performing at least in line with competitors, with robust, enduring and valuable franchises at that point.” Mr Hester said the bank would have to contend with slow economies and uncertain regulatory impacts as it moved to turn the bank around.

He added: “There are important execution challenges to get to this recovered bank status still remaining.”

Mr Hester said financial recovery would provide a plat-form for “a period of significant outperformance” as demand for banking services improves in line with the economy. He added: “I hope this will provide a platform for privatisation to take place in due course.”

Mr Hester warned recent conduct issues such as Libor fixing, which is being investigated at RBS after Barclays was fined by regulators earlier this year, would prove costly for the bank.

He said: “We have to accept that the pendulum has swung, that society has a different attitude and determination to make sure that banks behave in a different way and improve their reputation.”