RBSI's price tag will have to be a little more realistic this time
Is secretive entrepreneur Peter Wood going to emerge from another crisis smelling of roses? Back in 1997, Wood pulled off a masterstroke when he got The Royal Bank of Scotland in a headlock with a gigantic volume-linked salary deal in return for ownership of the Direct Line business he founded. The deal spiralled out of control and forced the now ailing bank to buy him out to the tune of several million pounds.
At the time, Wood was lambasted Fred Goodwin style, but he re-emerged with the audacious launch of Esure and Sheila’s Wheels, which was in part funded by Lloyds Banking Group. This week, the government has committed to injecting a further £31bn into RBS and Lloyds, with the caveat that both businesses must make divestments.
In 2010 Wood will reflect on a decade since the launch of Esure and, while the firm is not believed to be part of the bank’s planned disposals, the new year could see him exit the business alongside Lloyds to embark on an altogether brand-new venture. Meanwhile, pity Paul Geddes. The new RBSI chief executive had barely decorated his office when he was confronted with fresh sale speculation. It makes you wonder who his first meetings have been with: Allianz, AXA, Allstate, Zurich, or another foreign investor looking for some household name brands on the cheap perhaps?
And so this tortuous sale process begins all over again, despite RBS still being a little loathe to accept that its crown jewels will have to be flogged off. But let’s be real from the outset. Even if you acknowledge that specific parts of the business are performing well, this time we’re looking at a price tag closer to £2bn than £6bn, aren’t we?
Common sense prevails, we hope
Like a dying senator, the FSA in its last days seems to be struggling to put right some of its wrongs. Chief among them for the broker community is the insane and totally unique arrangement whereby, under the Financial Services Compensation Scheme, brokers are left on the hook for insurers and banks that go bust. So it was excellent news and well overdue this week that the FSA has finally agreed to review the scheme. Surely common sense will ensure this review results in a revision – as long as it doesn’t get lost during any handover period with a new regulator. Congratulations must go to Biba and the IIB for banging the drum long and loud on this, and no doubt they will ensure that the FSA, or whatever succeeds it, will not be allowed to forget. Brokers should back them up – it’s their businesses on the line. IT