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RBS Plans Retreat From Ex-CEO Goodwin’s International Expansion

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By Ambereen Choudhury

Feb. 26 (Bloomberg) -- Royal Bank of Scotland Group Plc, the U.K.’s biggest-government controlled bank,
plans to scale back operations in 36 countries, two-thirds of its international presence, after posting the biggest
loss in British corporate history.

The bank will abandon or sell its retail and commercial banking operations in the Middle East and Asia, RBS said
in a statement today. In Europe, the bank will sell retail and commercial banking units except in Ireland. Morgan
Stanley and UBS AG are advising RBS on the restructuring.

RBS, based in Edinburgh, expanded to cover 54 countries worldwide under former Chief Executive Officer Fred
Goodwin. Stephen Hester, who replaced Goodwin as CEO after the bank sought 20 billion pounds ($28 billion)
of government month in October, may struggle to find buyers for assets as the credit crunch deters buyers. The
bank abandoned this month its 5 billion-pound sale of its Churchill and Direct Line insurance operations.

“If they were to try to sell most of these assets in a fire sale right now, it is likely that few bidders will emerge,”
said Philip Keevil, a senior partner at London-based financial advisory firm Compass Advisers LLP.

RBS said today it will put 325 billion pounds of investments into a state insurance program and shift toxic assets
to a new unit. The U.K. Treasury will also inject a further 13 billion pounds into the bank in preference shares,
which would help raise its stake to 84 percent, Chancellor of the Exchequer Alistair Darling said today. The
government will limit its voting stake to 70 percent.

The bank told investors today it plans to exit its global banking market operations in New Zealand, Pakistan,
Portugal, Romania, Venezuela and Vietnam.

‘Distressed and Pessimistic’

“At all times we will responsibly compare the value to RBS of each of our businesses with realistic alternatives
and take different action if they prove compelling,” Hester said today. “However, the distressed and pessimistic
state of markets for financial assets and businesses offers little immediate encouragement in that regard.”

Over the past decade, RBS gorged on $140 billion of takeovers in the U.S., Asia and Europe, buying up part of
ABN Amro Holding NV of the Netherlands in 2007; a 5 percent stake in Bank of China Ltd. in 2005; and
Cleveland-based Charter One Financial Inc. in 2004.

The investment in the Beijing-based Bank was sold last month for $2.3 billion, loosening RBS’s foothold in the
world’s most populous nation. Goodwin’s 14.3 billion-euro ($19 billion) acquisition of ABN Amro triggered half of
its writedowns this year, according to the bank.

“The task of unraveling previous management largesse has begun in earnest,” Richard Hunter, head of U.K.
Equities at Hargreaves Lansdown Stockbrokers in London, said today. “The overall strategy must now be
implemented amidst a further deteriorating economic backdrop, and it remains to be seen how RBS weathers
this further storm.”

To contact the reporters on this story: Ambereen Choudhury in London at achoudhury@bloomberg.net

Last Updated: February 26, 2009 07:16 EST

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