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FD Interview: Bruce Van Saun

Bruce Van Saun, FD at RBS, explains how he is tackling the biggest turnaround job on the planet

YOU GET the feeling that Bruce Van Saun works hard to avoid thinking too much about the past. His agenda as group finance director of RBS, Britain’s most controversial bank, is the here and now and the next couple of years; in short, the rest of the time covering the five-year plan to resuscitate RBS after its dalliance with collapse. When he talks, Van Saun keeps the focus on the test that rebuilding RBS presents to its executives.

“I don’t think I’d be attracted to something that was a maintenance job, where it’s clipping coupons or without a lot of change agenda associated with it,” he says.

Financial Director met Wall Street veteran Van Saun three years after arriving at RBS. We need little reminding of the trouble in which the bank found itself when he arrived. Reportedly with just days to go before total insolvency in 2008, RBS, along with Lloyds, was bailed out to the tune of £20bn and effectively privatised by the UK government. The state now owns 82% of the bank. Its then chief executive, Fred Goodwin, has departed and faced public vilification ever since. A new board is now in charge, the business model has been completely redrawn and thousands of staff have lost their jobs.

After 25 years on Wall Street, Van Saun took the job following a telephone conversation with new CEO Stephen Hester which, he says, went something like: “How would you like to join me on the biggest turnaround on the planet?” Van Saun blithely adds the offer had “a certain attraction to it”.

He arrived in London in October 2009 after spending eight weeks discussing the job and going over the bank’s numbers. He had, at that time, spent just over a year advising private equity and before that 11 years with the Bank of New York Mellon where he had served in several posts, finishing as CFO and vice chairman. He was instrumental in bedding down the merger that created the bank and in transforming it from a regional player to a globally recognised force. He also had spells with a small collection of financial institutions; his only other job outside of Wall Street was with food giant General Mills, makers of Cheerios and Häagan-Dazs ice cream.

Back in business

So where is RBS now? According to its results it has made progress. Van Saun says it “basically” had too much leverage. Its core tier one capital ratio now stands at 11.3% (better than the 10% required by regulators). Operating profit for the first nine months of 2011 is £2.1bn (against £1.8bn in 2010). Core retail and commercial businesses (excluding Ulster Bank) are showing a 16% return on equity (a common bank measure of success); asset reduction stands at £600bn (£20bn ahead of schedule) and the bank is investing in its branches, as well as £500m in new systems. Global headcount has been cut from 180,000 to 150,000, RBS is in the midst of selling substantial parts of its operations and cost savings of £3.3bn have been made.

But the bank is still adjusting its recovery plan. Disappointing results in some areas have prompted a restructuring of the investment and wholesale banking business with the loss of 3,500 jobs. Controversy and public opprobrium continues to dog the bank. Shortly after this interview, RBS became engulfed in a fresh row over Hester’s annual bonus. After pressure from Parliament and scant support from anywhere else, he finally announced he would not be taking it.

Despite all of this, Van Saun comes across as the kind of man who is never outwardly excited. Even when talking about his taste for a challenge, his stature and measured articulation combine to give the impression of a languid individual, in command of his surroundings and difficult to ruffle. This is probably for the best because the torrid recent history of RBS is never very far away. Van Saun sums it all up thus: “There’s never a dull day. It is always challenging, there’s always a new issue to tackle and wrestle with, and you’re constantly put to the test, which is the kind of job you want.”

That said, he admits that the RBS recovery is likely to go beyond the five-year horizon the board is working towards.

“We’re already at many of our balance sheet targets,” he says. “So, I think we’ve really made progress on the safety and soundness agenda. The full earnings recovery story is somewhat dependent on the economic conditions, and that’s going to take a bit longer.”

Legitimate gripes

What has changed, Van Saun points out, is that after an initial period in which the recovery from recession seemed on schedule, the environment has worsened.

“The drag from Europe and some of the tightening that’s required in the UK to put it back on a firm fiscal position is leading to a slower recovery, and a lower interest rate environment than we expected going into the plan,” he says.

This means that RBS is still taking flak. The share price, all important for the prospects of selling the government’s stake in the bank, is not helping. Currently around 23p, it was as low as 17.3p in November last year, down from what now seems a stratospheric high of 705p in April 2007. Debate about the bank, its past, the way it is being run, and its future continues to rage.

Van Saun acknowledges many of the complaints about the bank failing, but being bailed out are “legitimate gripes”. And he points out that part of the reason for doing this interview is to demonstrate that “we’re serious people who care about fixing the company, getting a good return for the taxpayer”. But he believes it is right that the government keeps its distance from the commercial running of the bank.

“It’s important that there’s a respect between the government and the board, with the management… making commercial decisions,” he says. “So far we’ve had reasonably good alignment on that.”

There is in Van Saun, though, concern that the “gripes” and the “beefs” should not cloud thinking about the real importance of financial institutions.

“The financial services industry is critically important to an economy and to economic growth and so, ultimately, the mindset has to change,” he says. “We need our banks, we need good people in these banks and these people have other options so they at least have to get fair pay. You can’t completely vilify them.” And by way of what seems almost like a personal plea, he adds: “We’re trying to rehabilitate; we’re regular people working really, really hard.”

Van Saun’s remarks were made before the furore over Hester’s bonus really exploded in the media. But, even so, it is obvious that he is not immune to the constant public scrutiny of events at RBS, not least because, despite adjustments, he is quite convinced progress is being made and that his risk in taking a post at the bank will be viewed positively.

“Time will tell,” he says. “There’s no certainties in life, really, but it makes it harder to be constantly vilified. For the guys in the white suits, or the shining armour, to come in and have to take the brickbats and all the mud that’s thrown at the company doesn’t always feel fair because we’re here to try and fix things.”

He adds: “You kind of have to put that aside and take comfort from the fact that you’re doing the right things and the people who really know – the investors, research analysts, the FSA, the Bank of England – they know that we’re making progress and we’re focused on what the really important things are.”

In some senses though, there is a hint of the buccaneer about Van Saun.

“People who know me in the US think I have a great sense of adventure,” he says. “You get to a point in your career when you turn 50 and you think, ‘what more can I do?’. What would be really interesting for another five-year burst that will give you self satisfaction, and hopefully position you for the next thing, or one last thing if that’s what it turns out to be. This fit the bill.”

And Van Saun – who admits leaving Bank of New York because the CEO’s post was not on the cards – says he still wants a top job.

“RBS is 150,000 people, a trillion pound funded balance sheet, in almost every business line and lots of geographies, and right at the intersection of the politics and regulatory vanguard,” he says. “I think it’s been a fabulous learning opportunity for me.” ?

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