A plan to spin off Royal Bank of Scotland Group PLC's (RBS) global mergers and acquisitions division into a boutique operation, in which the majority state-owned lender may hold a stake, could be finalized by the end of the year, said Simon Penney, chief executive of RBS in the Middle East and Africa.
The move is seen as part of a broader package of measures being taken by the 82%-government owned bank to strip back its balance sheet by disposing of riskier operations and to refocus as a retail bank.
In the last six months, RBS outlined a restructuring plan which will involve the loss of around 3,500 jobs over three years as the bank scales back large parts of it investment arm. It aims to boost profitability in response to upcoming U.K. government regulatory changes that are likely to force banks to separate their retail activities from investment banking.
In February the bank posted a net loss of £2 billion ($3.25 billion) as the euro zone crisis continued to weigh on its investment banking division, where profit fall by 54%, and as restructuring costs hammered the bank's bottom line.
At the time CEO Stephen Hester said the bank will likely look to conduct an initial public offering for its insurance business, as well as selling its cash-equities, equity capital markets, corporate-broking and mergers-and-acquisitions activities in the Asia-Pacific region.
Over the past five years the bank has shrunk its balance sheet by around £700 billion. The group's funded balance sheet decreased by £49 billion to £977 billion at the end of 2011. In 2011, the cost of restructuring was around £1 billion.
Penney said the boutique bank would take over the current mandates that bankers at RBS are working on and that RBS may hold a stake in the new entity. He said that details of the project still need to be finalized.