RBS announces branch closures

Royal Bank of Scotland has announced it will close more branches as part of a cost-cutting strategy but promised improved customer relationships that will lead to better returns for shareholders.

Speaking at the bank's annual general meeting (AGM) chairman Philip Hampton and chief executive Ross McEwan reflected on how well the five-year plan for the organisation set out in 2009 following its reconstruction has gone.

Shares were down 1.2% to 323p on Wednesday following the commencement of the AGM.

While both praised the work done to return RBS to its retail banking roots and reduce wholesale lending, the £8.2 billion pre-tax loss announced in its 2013 full year results could not be ignored.

Hampton said while RBS was a "much smaller, simpler bank" the last five years had not been a "smooth ride" and blamed the costs of customer redress for mis-selling scandals around payment protection insurance (PPI) and Libor among others for the loss.

The continued losses means the RBS still needs to go some way to rebuilding its capital strength and part of that will be to review its branch network - it has already closed 100 branches of RBS and its subsidiary brand Natwest in the past six months. Hampton noted online and mobile transactions have increased 232% since 2011 while bank branch visits have declined 30%.

"With continued rapid change in the way people choose to bank, there will inevitably be further closures," he said. "Where we have to make the difficult decision to close a branch we will tell our staff and customers first and set out what the alternatives are, such as the Post Office network or mobile vans."

"Longer-term returns"

McEwan said the bank was on track to make £1 billion of savings in the next year and take £4.3 billion out of the cost base by 2017 through disposals that no longer fit with its new streamlined structure focused on "future needs of customers".

"Nowhere is the change in customer need more evident that with our branch network," said McEwan. "The truth is that some branches hardly see a customer, which is why we are taking tough decisions about closing some, and sometimes making staff redundant."

He added that existing customers were now being offered better deals in the past reserved for new customers, will have faster access to online banking, access to more cash machines and better product pricing.

"Of course as shareholders I think you will agree that what is good for our customers is also good for you as shareholders," he told the AGM. "Building a better customer relationship so that we can attract more of their business. That means better, cost-effective, longer-term returns for the bank."

McEwan said better banking meant better prospects of a dividend for shareholders, who have not received a payment since the financial crash in 2007 when taxpayers took a stake of 81% in the bank.

"I am only too aware that shareholders have not received an ordinary dividend payment since 2007 and that shareholder returns have been unacceptable," he said. "So I want to underline that this is a strategy that will deliver for our shareholder as well as our customers. In my experience there is total alignment between these two groups."