RBS to retreat from mergers and acquisitions activity

Royal Bank of Scotland (RBS) expects flat revenues in its Middle East business this year against a gloomy global backdrop, its regional head says.

RBS will focus on debt and investor products, risk management and transactional banking as it exits mergers and acquisitions as part of a global shake-up, Simon Penney, the RBS country executive for Middle East and North Africa, said yesterday.

"What's happening in Europe with the euro-zone crisis and even slower US growth can not be underestimated and that will impact global values and trade," he said.

As part of the global overhaul, announced last week, the UK's fifth-biggest bank said it was making cutbacks in investment banking and shedding 4,450 jobs.

Mr Penney said only a low single-digit number of staff in the region would lose their jobs. The bank employs 220 people in the region, mainly in its Dubai headquarters.

No decision had yet been made on whether to sell or wind down the mergers and acquisitions (M&A) unit, he said. The decision reflected the slowdown in investment banking business globally, Mr Penney said.

In the region, volumes within the investment banking industry were down 30 per cent last year from the previous year, he said.

"Our M&A team [in the region] have been right sized over the last few years and the impact on the team is negligible," he said.

Last month the bank said it was working on Saudi Arabia's Aujan Industries sale of a 50 per cent stake to Coca-Cola for US$980 million (Dh3.5 billion).

The exit from the bank's M&A unit will take place after the completion of the deal in the first half of the year, said Mr Penney. RBS' global restructuring comes after growing pressure from the UK government, which owns 83 per cent of the bank, to shed the riskier parts of its business.

"The restructuring in the Middle East is a reflection of changes in the global economy," he said.

"We have seen an oversupplied environment where the business environment continues to decline and it is also in response to a changed banking environment," he said.

"We have challenging headwinds and a changed environment from a capital and regulatory standpoint."