ROYAL Bank of Scotland's annual general meeting this week is already the hottest ticket in town. Roll up to see the country's most powerful businessman squirm in front of a packed house of bewildered shareholders. Watch in wonder as the chairman offers excuses for a series of U-turns.
With the promise that a sackful of cash will be conjured from the wings, this promises to be an event not to be missed. The dramatic denouement could be that one or other of the star performers steps off stage for a final time.
Sir Fred Goodwin an
d his amazing team of dancing bears have a lot of explaining to do when they gather on Wednesday. Faced with the prospect of seeking Britain's biggest-ever cash call, the chief executive has to answer those who were told just weeks ago there was no reason to raise capital. Now we're hearing it could be anything up to £13bn. Either somebody got their sums badly wrong, or Goodwin spent the last three months with his fingers crossed and praying by his bedside that the balance sheet nightmares would go away.
Well, they haven't, and now he's got to come up with the dosh. It may not be enough. Stretching the balance sheet may be one thing, but misdirecting the City is another. For some this is a heinous crime, and they will not be satisfied until Goodwin's head is served up on a plate. Either his, or that of a colleague. Sir Tom McKillop, so far regarded as an amiable and experienced chairman who has slipped easily into the shoes of the avuncular Sir George Mathewson, is also exposed. Some say he is too weak to handle the chief executive, whose boyish looks betray a steely and uncompromising approach to business. Goodwin did not get where he is without kicking ass, and he brought his more fearsome side with him from Clydesdale Bank, where he earned his moniker 'Fred the Shred'.
As the most focused of businessmen, Goodwin has driven growth at an astonishing rate of knots, tackling the RBS brief with a determination to be top dog. The goal has been to put the one-time bit-part player on the world stage, to leave behind its provincial roots and rub shoulders with the likes of Citigroup, Deutsche and JP Morgan. Well, he has done that in more ways than one. Not only has RBS broken into banking's premier league, it is also counting the cost of the credit crimes committed by its new friends in high places, and for the cost to its balance sheet, which has been pummelled in the process of acquisition. For that, Goodwin and his cast of highly-paid boardroom buddies have to take the rap.
The journey from the gentility of St Andrew Square to ostentatious headquarters at Gogarburn has been punctuated by big buys that have built some big egos. But even this rise from backstage to star billing has not been enough to satisfy the City boo-boys who never liked the fact that RBS was based in Scotland, or that it had the audacity to buy one of England's own: NatWest. The City also disliked its arrogance, the resistance of Goodwin to give interviews, even during the ABN Amro bid battle, and its minimal, almost grudging communications at times when everybody demanded it. Last week, for instance, it offered a mere holding statement that offered little enlightenment.
The bank's explanation for such behaviour is that to respond to every rumour risks triggering even wilder speculation on the one occasion it chooses to say nothing.
It doesn't do much, however, to convince its critics that it deserves more than a good kicking for its aloofness. Goodwin and his board may feel justifiably resentful that they have been badly rewarded for building a global bank, turning in a record profit of £10bn. Furthermore, shareholders may be better off now that their bank has stopped pretending the credit issue will go away and the balance sheet will mend itself.
Goodwin's decision to seek new capital may turn out to be a wise move at a time when capital is harder to find. He may yet have other tricks up his sleeve that will wow his audience. There is renewed talk that RBS will sell assets, with the insurance businesses Direct Line and Churchill back among those it may now wish to offload. Selling assets would offset the sum required in a rights issue. Who knows if Goodwin may also be looking to his friends in the East, possibly the Sovereign Wealth Funds, as another financial prop? Barclays did it. So did Citigroup and Merrill Lynch, and these are, after all, the people Goodwin wants to be among.
Undoubtedly this is the lowest point in Goodwin's career and those waiting for the opportunity to trip him up will be rubbing their hands at the prospect of him falling on his sword. But that looks unlikely. Goodwin is a survivor, and it would be typical for him to tough this one out rather than take the easier route of stepping aside.
The full article contains 865 words and appears in Scotland On Sunday newspaper.
