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RBS plans to keep Coutts UK in £500m wealth sale

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RBS plans to keep Coutts UK in £500m wealth sale

Royal bank of Scotland intends to keep its UK wealth business in a significant step back from the international wealth management stage.  

According to the Financial Times, the state-owned bank sent a memo to staff on Monday indicating it hoped to secure a sale, merger or joint venture for Coutts International.

A sale, which is not expected to include the Coutts brand, could fetch £500 million, with Royal Bank of Canada and Brazil’s BTG Pactual seen as early frontrunners.  

‘We face a challenging path to deliver our strategic plan of 15 per cent-plus return on equity given the dynamics of compressed margins and the increasing need for scale in international businesses,’ the memo read.     

The decision is part of major strategic overhaul at RBS, which will see the bank reposition its wealth proposition, which includes seperate entity Adam & Company.

The disposal comes at a time of mounting regulatory pressure at Coutts.  

At the start of June Wealth Manager revealed that Coutts had issued a suitability warning in a letter sent to all its UK clients, which include the likes of the Queen and David Beckham.

It said the review would be concluded at the start of 2015, with chief executive Michael Morley telling Wealth Manager every investment dating back to 1957 would be reviewed.  

Two years earlier Coutts was fined £8.75 million by the financial watchdog for anti-money laundering controls. 'Coutts’ failings were significant, widespread and unacceptable. Its conduct fell well below the standards we expect and the size of the financial penalty demonstrates how seriously we view its failures,' the regulator said.

Meanwhile its Zurich-based Swiss business is also facing the prospect of a fine for helping US citizens avoid tax.

In February Coutts admitted some clients may have avoided paying US tax and said it had 'notified the DOJ (Department of Justice) it intends to participate in the programme based on the possibility that some of its clients may not have declared their assets in compliance with US tax laws.'   

Earlier in the year RBS chief executive Ross McEwan (pictured) outlined his strategy to ‘improve’ flat Coutts.  

This commitment came after annual results showed Coutts income had slipped from 7% in 2012 to £1.09 billion in 2013, while return on equity (ROE) slipped from 13% to 12%.

McEwan, who is targeting a 15% ROE from Coutts, said at the time: 'Wealth is a good example of a business that we can improve. Coutts has excellent credentials but revenues have been flat over the last 12 months and returns have declined.’

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