Royal Bank of Scotland has told staff that it plans to offload the international operations of Coutts, its private banking arm, which caters for wealthy clients in continental Europe, the Middle East and Asia (as well as a certain resident of Buckingham Palace).
The FT’s banking editor Martin Arnold reports that the plan to split Coutts into its UK and international operations and to sell the latter, The plan - first reported by the Financial Times in July - reflects the 81 per cent state-owned bank’s new strategy of refocusing on its domestic market.
In an internal memo to RBS staff on Monday, the bank said: “We face a challenging path to deliver our strategic plan of 15 per cent plus return on equity given the dynamics of compressed margins and the increasing need for scale in international businesses.”
The UK private bank, founded in 1692, is being integrated with RBS’s commercial lending division as part of a strategic overhaul of the partly state-owned group announced in February.
RBS said it would “now work with local management teams to explore options including merging the remainder of the current Coutts International business, considering joint ventures or a sale, thereby reducing RBS’s footprint internationally”.
Coutts had £29.7bn of total assets under management at the end of last year, of which the international operation accounted for 41 per cent. The best-known of its discreet client list is Queen Elizabeth.
Bankers said the international arm was likely to be worth about £300m-£400m. RBS’s private banking division made a total operating profit of £221m last year, of which the international arm made about £67m.
Bankers said that splitting Coutts in two would make sense as its international clientele is, on average, much richer than its UK customer base, so they require a different level of service. They also said the risks of owning an international private bank were hard to stomach for a bank that is 81 per cent-owned by British taxpayers.
Founded by John Campbell, a Scottish goldsmith, Coutts opened its first branch on London’s Strand under the sign of the Three Crowns. The bank took its name from two brothers, Thomas and James, who joined it in the mid-18th century and established its reputation as private banker to Britain’s aristocracy and royal family.
