RBS winding down operation in Malaysia


  • When contacted, RBS confirms that the banking group is leaving the country
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This article first appeared in The Edge Malaysia Weekly, on October 31 - November 6, 2016.

 

AFTER more than 120 years of operation in Malaysia, The Royal Bank of Scotland (RBS) has decided to wind down its business here and exit the country.

“It is likely to be by the end of this year, which is a couple of months away,” says a source familiar with the matter.

In an August announcement to staff in Kuala Lumpur, sighted by The Edge, it stated that the Malaysian business will start winding down after a mutually agreed decision with CTBC Bank and Taiwan Life Insurance to terminate their agreement to be the buyers of RBS’ franchise in the country.

“[The bank’s] clients have also been informed that the foreign bank will be closing its doors here by year-end,” says another source.

To recap, CTBC Bank’s parent, CTBC Financial Holding Co Ltd, announced in May that it wanted to buy RBS’ Malaysian operation for US$189.7 million to gain a foothold here. The deal valued the operation at 0.95 times book value. However, the transaction did not materialise.

When contacted, RBS confirms that the banking group is leaving the country.

“In February last year, we communicated our intention to make RBS a simpler, stronger, more sustainable bank, more aligned to the needs of our customers in the UK and Western Europe. Since then, we have been exiting our Capital Resolution operations in Asia-Pacific through the sale of portfolios or by winding down the businesses,” RBS states in an email reply.

“On April 15, RBS entered into an agreement (IA) with CTBC Bank and Taiwan Life Insurance to be the buyers of our Malaysian franchise,” it says, adding that they have mutually agreed to terminate the IA after concluding that completion will not be achieved within the timelines stated.

Following that, the Malaysian business will commence wind-down in an orderly and safe manner, it says. “We will treat all of our employees in Malaysia fairly, and in line with our global policies and local practices. It is our intention to give people clarity on their position.”

For the first six months ended June 30, 2016 (1H2016), RBS Malaysia registered a net profit of RM22.1 million, down 9% from RM24.4 million a year earlier.

For its financial year ended Dec 31, 2015, RBS Malaysia saw its profit rise 55% year on year to RM26.3 million.

Nevertheless, from the recent financial results, one can see that the group has been slowly winding down its operations here.

In 1H2016, RBS Malaysia’s assets fell more than 40% to RM1.96 billion. The fall was due its cash and short-term funds dipping by half to RM1 billion and a 64% decrease in its derivatives financial assets to RM189.8 million from Dec 31 last year.

The UK-based banking and financial services company, which is headquartered in Edinburgh, is in the midst of a reshaping and restructuring exercise where it plans to build a strong, simple and fair bank. Part of the exercise includes reducing its operating expenses by £800 million (about RM4 billion).

“Over the last few years, RBS has built a good track record in restructuring and we reinforced that record in 2015. The sale of Citizens [Financial Group Inc] was completed early following the largest US bank IPO (initial public offering) ever. We are well through the sale of our international private banking business, and are winding down our non-UK transaction services business. Major loan portfolios have been divested, and the progress continues on the complex process to exit 25 of the 38 countries in our international network,” RBS chief executive Ross McEwan says in its 2015 annual report.

Citizens is the 13th largest retail bank in the US, according to its website.

Last Tuesday, news reports in Europe quoted sources as saying that Clydesdale Bank PLC made an offer to take over RBS’ Williams & Glyn business after Spain’s Banco Santander SA called off discussions with the British lender last month.

Williams & Glyn comprises RBS England and Wales branch-based businesses as well as certain small and medium enterprises and corporate activities across the UK.

After RBS received financial support from the UK government in 2009, it committed to the European Commission that it would sell a number of its branches.

In 2012, CIMB Group acquired most of RBS’ Asia-Pacific cash equities and associated investment banking businesses for RM849 million.

That acquisition by the second largest banking group in Malaysia also included RBS’ cash equities units in Australia, China, Hong Kong, Taiwan, the US and the UK, and equity capital markets and merger and acquisition divisions in Australia, China, Hong Kong, Indonesia, Malaysia, Singapore, Taiwan and Thailand.

The deal had many wondering if it was a prequel to the exit of RBS from Malaysia.

Nevertheless, RBS Malaysia’s then country executive Andrew Sill told The Edge in 2012 that the UK-based bank was still committed to Malaysia.

He shared that the group had had two chances to walk away from the country but did not — once in 2009 when it exited some Asian countries that included Vietnam, the Philippines and New Zealand, and another time in January this year when it did a strategic review.

Sill has since left RBS Malaysia and is now HSBC’s head of commercial banking in Malaysia.

Earlier this year, RBS found itself embroiled in the global investigation into alleged corruption related to 1Malaysia Development Bhd. In April, the Swiss authorities launched an inquiry in relation to “certain client accounts held with Coutts”, the former Swiss-based arm of RBS’ private bank.