RBS 2008 Annual Report Download - page 7

RBS Group Annual Report and Accounts 20086
Group Chief Executive’s review continued
Our Manufacturing Division will re-align with our
customer-facing businesses. Businesses will have clear
bottom-line returns, allocated equity and balance sheet
and funding goals. While we drive for profit, there will be a
concentration on earnings quality and sustainability, driven
by strategic plans, to ensure alignment of our businesses
to their markets and their risk targets. People evaluation
and incentivisation will meet best practice levels to
support the revised mission of the company.
This will be underpinned by a full suite of risk and
funding constraints, including concentration limits.
This major change programme has already begun.
To carry it through while running our continuing business
in difficult markets will test our management capacity. We
expect to be successful overall, though we will inevitably
have setbacks and make mistakes along the way. But there
is no alternative. RBS must change in a far-reaching way. If
we do that, the strength, quality and power that are already
present in our business across the world will be what shines
through once again.
Outlook
To make any forecast is hazardous, beyond the expectation
that 2009 will be a very tough year for the world economy.
RBS, in common with all banks, will see some erosion of
underlying income levels as a result of weaker business
activity and low interest rates squeezing savings margins
whilst credit costs rise, probably sharply. We hope that
markets will be less disrupted than in 2008, with lower
associated write-downs, but time will tell. 2009 has, in
fact, started well for our businesses.
We have confirmed our intended participation in HM
Treasury’s Asset Protection Scheme (APS). This would be
subject to shareholder approval. More information will be
made available as soon as practicable.
Notwithstanding the challenging outlook, our businesses
all around the world are inherently good and fully engaged
in sustaining as robust a performance as the environment
permits. And the strategic restructuring we have embarked
on will see high levels of activity designed to reposition
RBS successfully.
I believe RBS can come to be regarded again as one of
the world’s premier financial institutions. My special thanks
go to all my colleagues around the world serving our
customers everyday, and redoubling their efforts to move
RBS forward again.
Stephen Hester
Group Chief Executive
Our priorities
Our aspiration
RBS should again become one of the world’s
premier financial institutions, anchored in the UK but
serving individual and institutional customers here
and globally, and doing it well.
Our aims
To achieve AA category standalone credit status
To rebuild shareholder value, along the way
enabling the UK Government to sell down its
shareholding
We will achieve our aims by
Focusing our activities on serving enduring
customer franchises, with top tier competitive
positions where we choose to compete
Targeting 15%+ return on equity in our businesses
Achieving primarily organic growth at rates consistent
with the markets in which our businesses operate
Using proportionately our balance sheet,
funding and risk
Having businesses that reinforce each other with
shared products, customers and expertise
Our approach will entail
A purposeful management style
“Making it happen” for our customers and then
for our shareholders
A strategic understanding of our businesses
and a focus on long-term, quality profitability
A business mix more biased than before to
stable customer businesses
Aiming to rely less on volatile, unsecured
wholesale funding