Average pay in RBS’s investment bank? £197k. Here’s who’s safe

For all the bombast about punishing investment bankers, cutting the bonus pool and doing away with a standalone investment bank, people in RBS’s corporate and investment banking business didn’t get paid too badly last year. That is, the people who survived. This year could be far, far worse.

At the end of 2014, RBS had 3,700 people working in its newly created ‘corporate and institutional bank’ (CIB).  The compensation bill for those 3,700 was £729m, implying average pay per head of £197k ($304k). RBS isn’t exactly on the same podium as Goldman Sachs, which paid $378k last year, but it’s not dancing in an entirely different discotheque either.

Something bad happened to headcount in RBS’s investment last year, however. Up to 6,600 people disappeared. At the end of 2013, RBS employed 10,300 people in its then ‘markets’ division. At the end of 2014, only 3,700 were in the new CIB. What happened to the rest? No one knows. Quite a few of them have likely been shifted to RBS’s corporate centre, where staff numbers rose dramatically. 700 were shunted into the Capital Resolution Group, RBS’s bad bank. Even more confusingly (and as if to deliberately obfuscate the matter), RBS said on today’s call that it actually employs 16,000-18,000 people in its CIB. A spokesman confirmed that the 3,700 are front office people alone, meaning that £197k is the average pay per head for RBS’s traders and salespeople – excluding all support staff.

Less equivocally the CIB bonus pool has been slashed. Between 2013 and 2014, the bank says variable compensation in the business was cut by 53%. In the light of the (seemingly massive) reduction in staff numbers, this looks inevitable. Unhelpfully, RBS doesn’t offer comparable CIB headcount for 2013, making it impossible to fathom the change in average bonus per head.

Whatever the extent of the job cuts at RBS’s investment bank in 2014, even more will go in 2015. RBS is committed to shrinking its investment bank further still. By 2019, it wants to reduce its risk-weighted-assets by another 66%. From now on the bank will focus increasingly on Western Europe and on the UK in particular. There will be nine European offices and the UK, the US and Singapore will have their own ‘distribution and trading hubs.’ Traders and salespeople elsewhere need to watch out.

Who’s safe then? Try FX and rates professionals in London and the US. Try debt capital markets, structured finance and syndicated loan professionals in London. Anyone in Asia looks exposed: as the chart below, taken from today’s presentation shows, RBS plans to cut its investment bank everywhere, but it plans to cut in Asia most of all.

The future shape of RBS’s CIB 

  Source: RBS

In the meantime. RBS’s investment bank is a far less exciting place to be if you’re an ambitious trader who likes to take risk. As the chart below shows, RBS cut Value at Risk (VaR) at its investment bank by 60% last year. That’s a lot – J.P. Morgan cut VaR too in 2014, but by a mere 19%. 

Risk taking in RBS’s investment bank 

Source: RBS

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