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‘Project Cook’ Signals Huge RBS Cost Cuts

The new head of Royal Bank of Scotland (RBS) is preparing to take another axe to the lender’s cost-base in a move which could herald thousands more job cuts.RBS Cost Cuts

Sky News has learnt that Ross McEwan is working on the plans, to be announced alongside the taxpayer-backed bank’s annual results in six weeks’ time, under the codename Project Cook.

The name is understood to be a reference to Captain James Cook, the English explorer who sailed along the coast of Australia in 1770, and is a nod to the RBS chief executive’s success in cutting costs at Commonwealth Bank of Australia, where he ran its retail operations for five years.

Mr McEwan’s plans for RBS will not be finalised until next month, when he will announce the details to the City, but he has told colleagues that he expects “very substantial” cost cuts to be identified as part of his review.

The bank’s workforce is already one-quarter smaller than the 161,000 people who were employed by it when taxpayers injected £45.5bn to rescue it in 2008.

More than 40,000 people have left RBS since then, many through redundancy, with others leaving as part of the sale of dozens of businesses by Stephen Hester, Mr McEwan’s predecessor.

People close to Project Cook said that Mr McEwan would further shrink RBS’s markets and international banking operations, as well as setting out plans for greater automation of high street banking services.

Over time, this would result in far more cost-effective operations that would require a smaller headcount, they said.

About 120,000 people now work for the Edinburgh-based bank.

In RBS’s third-quarter results statement in November, the bank said that Mr McEwan was launching a review of its operations in an effort “to capture the full potential of its customer businesses”.

“The review will aim to improve the bank’s performance and effectiveness in serving its customers, shareholders and wider stakeholders.

“This will include detailed plans to realign the Group’s cost base, with a cost:income percentage target in the mid 50s, down from 65% currently.”

Even if RBS’s income remained constant, that shift would entail slicing hundreds of millions of pounds from RBS’s cost-base, but the sale of Citizens in the US and other business units will reduce the bank’s profitability in the short term.

“The aim is to put more capital and resource into areas where they generate income, and that will be one focus of the review next month,” said one source.

Since the November announcement, RBS has been hit by a series of further IT systems breakdowns which have inconvenienced millions of NatWest, RBS and Ulster Bank customers.

George Osborne, the Chancellor, is being kept informed about the progress of Project Cook, as is UK Financial Investments, the agency which manages taxpayers’ 81% stake in RBS.

RBS, which declined to comment on Wednesday, is not alone among UK banks seeking to reduce its workforce.

Barclays, HSBC and Lloyds Banking Group have each either carried out or signalled plans to cut tens of thousands of roles as retail banking customers increasingly frequent use online and mobile-based services.

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