Ross McEwan, RBS: ‘We want to get back to being the number one for customer service ’

Royal Bank of Scotland chief executive Ross McEwan has a clear vision for Ulster Bank: to lead the market for service and trust

Trust and top-class customer service. Those are the two key goals that Kiwi banker Ross McEwan is hoping will “turn a magnificent brand around” under his watch.

He's referring to Royal Bank of Scotland, whose brand has been so tarnished by various scandals and errors in the past six years that even a large box of Brasso wouldn't be enough to polish its reputation.

It also applies to Ulster Bank, the Irish subsidiary that has sucked up £15 billion in capital from RBS since the crash in 2008 so that it can remain open for business. It was the result of a ill-judged lending spree on commercial real estate and tracker mortgages in the bubble years as it foolishly chased market share.

Ulster Bank was recently fined €3.5 million by the Central Bank of Ireland for IT failures in the summer of 2012 that locked customers out of their accounts over a period of 28 days. It was an embarrassing saga.


In the course of a 47-minute interview at Ulster Bank’s George Quay offices in Dublin last week, McEwan mentions great customer service and rebuilding trust 10 times as the way forward for the 287-year-old Scottish financial institution.

None of the problems listed above happened on McEwan's watch, of course. The straight-talking New Zealander only arrived at RBS in August 2012, having missed out the previous year on the top job at Commonwealth Bank of Australia, where he had been head of retail banking.

Professional challenge

McEwan actually took a pay cut to join RBS. “To turn around a bank like this with a really good team of people is a major challenge and why you get out of bed every day,” McEwan says of his decision to move to the UK.

He was promoted to chief executive in October of last year, replacing Stephen Hester, the man who hired him.

RBS considered cutting its losses at Ulster Bank this year when it carried out an in-depth strategic review of the options available to the group.

McEwan says those included “should we sell, should we merge with other players, should we look at buying other [loan] books, do we take in extra capital from other parties and do other things, or should we just hold?

“The answer after five months of pretty extensive work was that this was a business that we should hold on to ourselves,” he explains. “We’ve got a good position here as the number three in the market. We believe we can be a very good bank for the Republic of Ireland and get a return in the medium term, the next four to five years.”

He acknowledges there was interest from private equity groups once the review began but it “never got to any stage where we were having detailed conversations”.

Why did RBS eventually decide to commit to Ulster Bank in the Republic?

“It had really good people that faced on to customers,” he says.

“It also had some really loyal customers that wanted Ulster Bank to succeed again. If you can pull those things together and see a path to profitability and get a return on equity, then you should stay in the market.”

Will RBS get its £15 billion back?

“No. I don’t think we will and I think we should say that was part of the price of us actually having to save the business and the cost of some strategic moves 10 years ago that, in hindsight, weren’t the best of things to do.

North and South

“But it also showed our commitment to Ireland, both Northern Ireland and the Republic . . . we stood behind our businesses.”

Ulster Bank actually fancied its chances of being the biggest bank in the Republic about a decade ago. This is not McEwan’s ambition.

“Let’s be clear. We want to be a force for different things than we aspired to be 10 years ago. Because, 10 years ago, we aspired to be the biggest bank here. What we’ve said is that we’d like to be a really good challenger bank,” he says.

What does that mean?

“We want to get back to being number one for customer service and to start bringing trust back into the service stream. The trust has been really eroded badly over the past five years. So we’ve put those two as the big overarching goals for all of RBS.

“That’s quite different to the aspiration 10 years ago, which was to be the biggest bank. The number one in the sense of market share.

“My aspiration is be a number one in terms of service and trust, which is quite different.”

McEwan says Ulster Bank’s current market share is 14 per cent.

Changes to the way it is organised here have already begun.

It was previously run on an all-Ireland basis but earlier this year RBS said the Northern Ireland piece of Ulster Bank would align itself with NatWest and RBS in Britain, while the Republic would paddle its own canoe.

McEwan says this reflects the fact they have different regulators and operate in different currency areas. It will eventually result in different leadership teams being put in place for North and South.

“Until we’ve properly separated those, Jim [Brown, the Dublin-based chief executive of Ulster Bank] will remain in charge of both but, over a period of time, the Northern Ireland piece will go across to the England, Wales and Scotland operation.

“It’s going to take a couple of years. That alignment won’t happen overnight.”

Ulster Bank has also been trimming down the scale of its operation in the Republic.

Last month, it announced the closure of 14 branches in a move that will affect 47 staff. This will bring its branch numbers down to 111, with the bank telling staff there would be no additional closures in 2015.

It has also offered a pay deal to staff, that will shortly be put to ballot. In parallel with this, Ulster Bank has negotiated a deal with An Post to allow its customers access certain banking services in post offices around the country.

McEwan says he can give no guarantees to staff that further changes to the business model won’t be necessary in the long run.

“We have to be quite honest with our people and say there is no end to change in banking because of how customers are interacting with us is changing so dramatically. Ten years ago, we didn’t have mobile banking. Today, if you don’t have a good mobile app, you don’t have banking for any new customers because they just won’t come to you.

“The message for our people is that we need to adapt and we need to be adapting far quicker than in the past, which means we have to keep our staff skilled.”

While the businesses north and south are diverging, McEwan said Ulster Bank in the Republic would continue to draw on certain resources from RBS.

“For example, as we do systems developments, which is very important in mobile technology, in which we are leaders in the UK, Jim [Brown] and his team will operate off the back of the same developments.”

Its Lombard asset finance business is being rebooted in Ireland, having taking a battering after the crash here.

“There’s other parts of the markets where we’d like to be better for customers. For example, we’re not that strong in personal lending, cars and personal unsecured lending.”

McEwan also highlights its pricing structure, which sees it charge the same fees for services whether its in branch, online or mobile.

“This is the type of thing that we’ll compete on. Customers will see that we’re fair to them and they can trust us again to do the right thing.”

McEwan is also clear that Ulster Bank has to “perform”, as will all other arms of RBS.

What would be a satisfactory return?

“In the medium to long term you’d want to see it around the 10-12 per cent return on equity.

“From a bank of this shape, that’s what you’d expect. It has some things that are dragging it down at the moment and pulling returns down that we’ll have to work our way through. We think an appropriate time is four to five years to get to that level.”

He’s particularly pleased with the progress that Ulster Bank has made on its mortgage arrears, with 19 consecutive months of decline in the book.

“The team here have been very good at getting their clients back paying their mortgages, which has been a long term strategy.

“If customers work with us, we will work with them to help them get back in shape. The difficulty is when customers don’t work with us or obstruct the conversations and won’t talk to us.”

McEwan obviously isn’t easily shocked because he claims not to have been horrified by what he found at Ulster Bank on taking the RBS reins 13 months ago.

“It had some loan books that are problematic. There’s a large tracker loan book that is not producing returns. You had some loans that were better in other people’s hands than ours because they needed a lot more work than we could give them.

“We had assets that were highly capital-intensive. That again shouldn’t have been on our books but were there because of our desire to grow the bank in the past 10 years. And it had a cost problem.”

Costs are coming down as part of an initiative across the group to trim its expenses by £1 billion, and Ulster Bank returned this year to the black. In the third quarter, its operating profit rose to £382 million, primarily due to further net impairment releases.

British bailout

At a group level, a big issue is around paying back the £46 billion bailout it received from British taxpayers.

“They will get that back when we as a team have created a really good bank,” he says.

“If you have a look at the things we need to do over the next 12-24 months, you’ll find this bank in quite a different position.

“At the end of this year it will be in a much better position than it was at the end of 2013. By the time we get to the end of 2015 and then 2016, which is what my strategic plan for the three years was, you’ll see a very solid bank.

“I think we will be getting a return of 9 to 11 per cent on the entire business. We’ll have our customer service levels up, we’ll have our staff really engaged in the business. We will have re-established our franchises, of which Ulster is one. You will see the share price move up because of the value that’s being created.”

How long will it take to repay the money in full?

“I think the government will take its time to start getting itself out [of its 81 per cent stake]. The thing you have to remember is it’s £46 billion. The market will only absorb so much per year. The market could only take £5 billion , maximum £10 billion a year. So it could take some time.”

McEwan, who will be 58 next year, says he would like the repayment to begin on his watch.

"Yeah, I certainly would. It would be good to be part of the reprivatisation of RBS. At the appropriate time. We shouldn't be rushing to do it but it's in the government's hands." CV Name: Ross McEwan. Age: 57. Job: Chief executive, Royal Bank of Scotland.

Lives: London. Family: Married with two grown-up daughters. Hobbies: Cycling and a “fanatical” fan of the All Blacks . Something we might expect: “Always finding the positive. We have to work with what we’ve got in life and not grumble at the circumstances we’re in. It’s all for a reason.”

Something that might surprise: “My first job [at the age of 12] was making speed roller skate wheels for an SME business after school finished.”