Royal Bank owner quizzed on appeal of executive pay policy
ROYAL Bank of Scotland owner Natwest Group has defended its remuneration policy as generous enough after a shareholder questioned whether it was able to attract highquality candidates to the bank.
The state-owned institution was quizzed on the attractiveness of its pay to senior executives at a virtual shareholder event yesterday, held seven days before its annual meeting. The bank’s annual meeting will be held behind closed doors, to comply with social distancing measures, on April 28.
Natwest selected internal candidates when it last recruited a chief executive and chief financial officer.
Chief executive Alison Rose had worked for the bank for more than 20 years when she was named as successor to Ross Mcewan in the second half of 2019, having first joined as a graduate in 1992. Katie Murray, a former finance director for Old Mutual Emerging Markets in Johannesburg, had joined three years before taking over from Ewen Stevenson as chief financial officer in 2018.
Asked by one investor whether the pay policy was able to attract highquality candidates to the bank, Robert Gillespie, chairman of the remuneration committee, rejected any inference that the bank had “some problem recruiting externally”.
Mr Gillespie said the recruitment processes for the CEO and CFO roles now occupied by Ms Rose and Ms Murray had involved “extensive” internal and external searches, which had attracted “high-quality candidates”.
He said: “The outcome of both processes was because we felt that the two internal candidates were the best candidates in every respect.”
The bank put forward a three-year remuneration policy last year, which Mr Gillespie said had been supported by more than 90 per cent of the votes cast.
Top brass at the lender, including Ms Rose and chairman Sir Howard Davies, fielded questions from investors on a range of issues at yesterday’s event.
Morten Friis, who chairs the risk committee, said the bank would continue to take a “cautious approach” when asked about its “appetite” for cryptocurrencies.
The value of cryptocurrencies such as Bitcoin has soared in recent months, but Mr Riis said it continues to represent a “high risk”, noting that it was an area where “regulation is in evolution”. He said the bank has “no appetite” for dealing with corporate customers directly involved in the exchange of cryptocurrencies, and would advise personal customers to exert caution if considering investing or transacting in them. Mr Riis noted that individuals should carry out due diligence before investing.
He said: “We expect to continue to take a cautious approach, but we will watch how the market evolves.”
Meanwhile, chairman Sir Howard Davies reiterated that the UK Government “does not interfere” in the commercial decision making of the bank.
The Government’s stake in the bank was recently cut to just below 60 per cent from 62%, after the lender purchased £1.1 billion of shares from the Treasury in a directed buyback.
Royal Bank of Scotland, which was recently renamed Natwest Group at corporate level, was rescued by UK taxpayers with a £45.5bn bailout at the height of the financial crisis around a decade ago.
As the bank’s biggest shareholder, Sir Howard said the Government was interested in issues such as its dividend policy and remuneration, but does not get involved in commercial decision making.
He said it was “welcome” that the Government had “restarted the process of selling down” its holding.
“They do not wish to be in the commercial banking business at all,” he added. “This was, in our view, a positive move. We think it is a sensible use of our capital to buy back shares from the Government.”
Sir Howard said the bank would pay a “modest” final dividend of 3p per ordinary share for 2020, equal to £346 million, if approved by shareholders at next week’s annual meeting.
The Prudential Regulation Authority had requested that banks suspend dividends as the pandemic took hold last year in order to ensure they preserved capital and could continue to lend to businesses and households as the crisis unfolded.
Sir Howard said the bank hopes to pay out a further £800m per year year in special and ordinary dividends over the next three years.
Natwest will report its first quarter results to the City next Thursday
(April 29).
In February, the bank reported a pre-tax loss of £350m for 2020, after setting £3.2bn aside to provide for bad loans arising from the coronavirus fallout. Ms Rose reiterated yesterday that the provision had been lower than previously forecast.
We felt that the two internal candidates were the best candidates in every respect