"I would confirm that among the strategic issues we have discussed with management are the US operations and the investment bank," Jim O'Neil, chief executive of UK Financial Investments told the parliamentary commission on banking standards on Tuesday. "The investment bank shape and size ultimately should be smaller than it is today."
The comments came after the bank has faced calls from the Financial Services Authority to sell Citizens, although RBS's chief executive, Stephen Hester, was expected to try to delay any sale until a turnaround of the business was more advanced. However, Hester did not rule out a sale when asked about Citizens last month, saying his focus was on improving its profitability.
Citizens and its subsidiaries, which operate more than 1,500 branches across 12 states and employ 20,900 staff, could fetch more than £9bn, analysts have estimated.
O'Neil also said RBS and Lloyds Banking Group, which is 40% taxpayer-owned, should both complete restructuring programmes by the end of next year, paving the way for the government to start selling its stakes. Taxpayers are sitting on a paper loss of over £20bn on RBS after the government spent £45bn bailing it out in 2008 – although last week it passed an important milestone in its journey back into private ownership by withdrawing from a government scheme insuring its riskiest loans.
The RBS chairman, Philip Hampton, also said last week the bank was preparing for the government to start selling its shares in 2014 and was laying the groundwork for a possible share sale to both institutions and individual investors. However, the bank's immediate future is clouded by an ongoing probe into manipulation of Libor and other interest rates, and last week it emerged it has suspended one of its most senior traders in London in the latest development in the Libor-fixing scandal.
O'Neil said UKFI was informed of the investigation by RBS earlier this year. Some analysts have said RBS could face a worse punishment than Barclays.
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