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I try to steer clear of individual company comments these days - burnt fingers from the LLMA fiasco. Any stuff here will lean closer to Stephanie Flanders' remit than Robert Peston's.
But as I was skimming through Royal Bank of Scotland's 274-page annual report (I'll have you know that I did six sets of annual results, from three continents, this morning before 10.45am -- Allianz, RSA, RBS, IAG, Trygvesta, and Aegon) I was muttering to myself "Jesus, this company is shit". And so it was a bit of a surprise to see the main thrust of the business commentary as positive.
Peston this morning covers much of the ground that occurred to me -- mainly that a bank that managed to coin £6.35bn from its investment banking arm still managed to book £3.6bn in losses, and that its impairments are still rising. It must be awfully disheartening to be on the investment banking side at RBS -- seeing all of the money that you are making, and a bit more besides, vanish into a black hole on the other side of the building. I heard a rumour that one of the stars on the RBS investment banking side said "fuck this for a lark, I'm off" and has promptly been snapped up by Nomura. The risk to RBS could be a reapeat of the Abbey National fiasco (which eventually led to it falling gratefully into the arms of Santander), where only children will be left to work in a world of sharks.
However, even Peston missed the arcane area of RBS Insurance -- a sizeable operation that RBS will have to sell as part of the EU stamping on companies that have the nerve to get state aid.
To be honest, the insurance results stank (compare and contrast them with RSA's numbers), but the most impressive performance (or, rather, the most impressive non-performance) was on the reinsurance side. RBS cut the amount it reinsured out from £206m (in 2008) to £165m. Its claims went up from about £3.1bn to £3.6bn. But the amount that it could claim back from reinsurers fell from £104m to £55m. Or, in simple terms, last year I had claims of £3.1bn, but I got half of my reinsurance premiums back. This year I had claims of £3.6bn (on roughly the same level of gross written premiums), but I got only a third of my reinsurance premiums back.
To be frank, that kind of thing would be hard to arrange even if you were trying. I can only guess that RBS had certain "attachment points" (in effect, the levels of loss from an event or a sector before the reinsurance payments kick in) that were just high enough not to kick in. One immediately has to suspect that the guys doing the underwriting at the reinsurance companies knew rather more about the business than did the buyers of reinsurance at RBS. Or maybe the guys at RBS were unlucky. After all, there has been a lot of bad luck there in the past few years.
__________
But as I was skimming through Royal Bank of Scotland's 274-page annual report (I'll have you know that I did six sets of annual results, from three continents, this morning before 10.45am -- Allianz, RSA, RBS, IAG, Trygvesta, and Aegon) I was muttering to myself "Jesus, this company is shit". And so it was a bit of a surprise to see the main thrust of the business commentary as positive.
Peston this morning covers much of the ground that occurred to me -- mainly that a bank that managed to coin £6.35bn from its investment banking arm still managed to book £3.6bn in losses, and that its impairments are still rising. It must be awfully disheartening to be on the investment banking side at RBS -- seeing all of the money that you are making, and a bit more besides, vanish into a black hole on the other side of the building. I heard a rumour that one of the stars on the RBS investment banking side said "fuck this for a lark, I'm off" and has promptly been snapped up by Nomura. The risk to RBS could be a reapeat of the Abbey National fiasco (which eventually led to it falling gratefully into the arms of Santander), where only children will be left to work in a world of sharks.
However, even Peston missed the arcane area of RBS Insurance -- a sizeable operation that RBS will have to sell as part of the EU stamping on companies that have the nerve to get state aid.
To be honest, the insurance results stank (compare and contrast them with RSA's numbers), but the most impressive performance (or, rather, the most impressive non-performance) was on the reinsurance side. RBS cut the amount it reinsured out from £206m (in 2008) to £165m. Its claims went up from about £3.1bn to £3.6bn. But the amount that it could claim back from reinsurers fell from £104m to £55m. Or, in simple terms, last year I had claims of £3.1bn, but I got half of my reinsurance premiums back. This year I had claims of £3.6bn (on roughly the same level of gross written premiums), but I got only a third of my reinsurance premiums back.
To be frank, that kind of thing would be hard to arrange even if you were trying. I can only guess that RBS had certain "attachment points" (in effect, the levels of loss from an event or a sector before the reinsurance payments kick in) that were just high enough not to kick in. One immediately has to suspect that the guys doing the underwriting at the reinsurance companies knew rather more about the business than did the buyers of reinsurance at RBS. Or maybe the guys at RBS were unlucky. After all, there has been a lot of bad luck there in the past few years.
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