Rumours have been flying that Royal Bank of Scotland (RBS) is selling its Asia-Pacific transactions business. But despite this chatter, and the fact that there are keen potential buyers, an executive at the bank says the venerable British institution is keeping investment and transaction banking and has plans to grow in the region.
RBS bought a significant chunk of ABN AMRO's assets, including its transaction banking business in Asia, for £10 billion ($16 billion) in 2007. Bad timing is an understatement, as within a year, the bank had written down nearly £7.7 billion of the Dutch institution's assets. When the British government took an equity stake in RBS last autumn, the future of those assets immediately came into question.
In August this year, the bank sold some of its commercial and retail assets in Asia to ANZ for $550 million. At the time of the sale, ANZ chief executive Michael Smith said the bank had not purchased RBS's Asian transaction banking business because it was "simply not for sale". MCB Bank bought RBS's assets in Pakistan for $87.4 million later the same month.
The British financial institution is still in negotiations with potential buyers over assets in China and India. HSBC and Standard Chartered are both said to be part of those negotiations.
At the Society for Worldwide Interbank Financial Telecommunication's (Swift) annual Sibos conference last week, RBS's global transaction services chief executive, Brian Stevenson, spoke to FinanceAsia to clear the air over the bank's strategy in Asia-Pacific.
What is RBS's strategy in Asia, especially with regard to transaction banking?
Asia remains important to RBS and it is a key market for the global transaction bank. The businesses we're primarily exiting in Asia are our retail and commercial businesses. This is a strategic decision from the group that is born out of our strategic plan of what we want to invest in. It has an ancillary impact on our transaction banking but not a significant impact. When we exit retail and commercial [banking] in Asia, we will lose a very small proportion of transaction banking revenues -- the revenues associated with our commercial banking footprint in Asia. We remain absolutely committed to remaining a wholesale and transaction banking business in the region.
It is generally accepted that to offer transaction services in a country, a bank needs an on-the-ground presence. Do you agree?
We have a significant on the ground presence in 11 countries in Asia, which we see as perfectly acceptable to be a regional player in Asia. Those markets are Australia, China, Hong Kong, India, Indonesia, Japan, Malaysia, Singapore, South Korea, Taiwan and Thailand.
Do you plan to expand RBS' transaction banking business in Asia?
The key part of our plan now is to finish the job with the separation [of the retail and commercial banking businesses] and the integration of ABN AMRO, which is important to Asia. We're on track, on budget and on-time, though it is subject to Dutch central bank approval.
Let's step back, what place does transaction banking have at RBS?
We have a new management team in place, a new chief executive and a large change in the board of the bank. When he came on board, [group chief executive] Stephen Hester commissioned a strategic review of all businesses in the organisation. The result of that review is that the transaction bank is defined as a core business in RBS. What "core business" means is we passed the test Stephen established for the business and we qualified for investment for the future. Transaction banking is seen as integral to the future of the growth and stability of RBS.
When we formed the transaction banking business we wanted to build the business on three strong legs -- cash, trade finance and cards. All three legs are important to us and under the strategic plan that I referred to we have substantial investment scheduled to be put in place for all three businesses.
Can you give me an example of an investment you're making in the transaction business?
There are a number of investments being considered at the moment. We view transaction banking as a global business so the focus of our attention is on making investment decisions that benefit our global franchise. We will make smaller investment decisions in regional markets, say for a specific product delivery in India, but our focus right now is a global delivery platform. While we are now in negotiations with potential buyers for certain RBS assets in India and China, these two countries remain central to both our investment banking and our transaction banking businesses in the region.
What transaction banking products are in the pipeline at RBS?
One area that we continue to make investments in over the medium-term is our cards business. The cards acquiring business has grown in domestic markets, for example we're very strong in the UK but we have presences elsewhere. With the growth of the internet there is an internet acquiring business and this is where the industry is globalising. Increasingly, we'll be playing a bigger role in acquiring through the internet. As credit and debit cards grow in Asia, the use of those cards online is a big global market. Also, trade services remain a key part of our Asian franchise and we will continue to invest in areas such as supply chain solutions.
What is the next big thing for transaction banking?
Well, one big thing on the cards side is the emerging themes related to new technologies -- particularly contactless cards and mobile acquiring. In other words, the transition from sticking a card in a machine and swiping it to contactless technologies, as well as the increasing move towards the use of mobile phones.